No, GOP Health Bill Does Not Reduce Requirements On Large Employer Health Plans

by felix
in Latest

The passage of the House bill to repeal and replace Obamacare has stirred up hysteria from the left and the media over how the bill might undermine health coverage for all sorts of people, nearly all of which is overblown or just plain false. One of the latest false criticisms spreading in the media claims that a provision to allow states to waive the essential health benefit (EHB) requirement puts everyone with an employer-sponsored health plan at risk of losing protections against catastrophic costs.

 

People are making a big deal over this because, if true, it could impact anyone with an employer-sponsored health plan, which is a broad swath of America. As Andy Slavitt, the former head of the Centers for Medicare and Medicaid Services under Obama, exclaimed to the Wall Street Journal, “It’s huge. They’re creating a backdoor way to gut employer plans, too.”

But this is simply not true.

Critics argue House bill guts worker protections

The claim that employees could lose protections against catastrophic costs appears to originate from Matt Fiedler, an economist at the Brookings Institution and form Chief Economist at the Council of Economic Advisers. Under the MacArthur Amendment, the House bill gives states the power to get a waiver from the EHBs required by Obamacare, also known as the Affordable Care Act (ACA). According to Fiedler, “a single state’s decision to weaken or eliminate its essential health benefit standards could weaken or effectively eliminate … the ACA’s ban on annual and lifetime limits, as well as the ACA’s requirement that insurance plans cap enrollees’ annual out-of-pocket spending.”

Why does Fiedler think a single state’s decision might impact people with employer-sponsored health plans across the country?

Though large employers are not required to offer EHBs, the ACA’s ban on annual limits, ban on lifetime limits, and cap on out-of-pocket spending applies to the EHBs that a large employer chooses to offer. To avoid the politically touchy matter of defining what is essential, the Obama administration allowed each state to select their own EHB from a set of “benchmark” health plans, which created the possibility of 51 different EHBs. Because employer health plans can cross state lines, federal regulators then decided to allow large employers to pick the EHB benchmark selected by any one state and apply it to their entire health plan for the purposes of applying the ban on annual and lifetime limits, and the cap on out-pocket spending.

Because these restrictions apply with respect to any one of 51 EHB benchmarks chosen by an employer, Fiedler argues the MacArthur Amendment could gut them if a state sets a lower EHB standard through a waiver and an employer then selects this new state EHB. In Fiedler’s worst-case scenario, if “even one state elected to completely eliminate its essential health benefit standards, the requirement to provide these protections would effectively disappear entirely for large employer plans nationwide.”

State EHB waiver does not apply to large employer health plans

There are a couple problems that entirely undermine Fiedler’s analysis. First off, the text of the MacArthur Amendment does not allow states to waive the EHB with respect to large employer group coverage. The text allows a state to specify EHB “for health insurance coverage offered in the individual or small group market in such State.” A basic rule of reading a statute is that the inclusion of one thing is the exclusion of the other. By specifying the waiver applies to individual and small group coverage, the text necessarily excludes any application to large employer group coverage.

No back door

Even if the text of the bill failed to specify that a state EHB waiver applies only to individual and small group coverage, federal regulations would still restrict large employers from selecting an EHB defined by a state. For the purposes of restrictions on annual and lifetime limits, federal regulations specify that a large employer “must define ‘essential health benefits’ in a manner consistent with one of the three Federal Employees Health Benefit Program (FEHBP) options as defined by 45 CFR 156.100(a)(3) or one of the base-benchmark plans selected by a State or applied by default pursuant to 45 CFR 156.100.”

This regulation would not allow a large employer to pick any state EHB they want as Fiedler suggests. To the extent a large employer can pick among state EHBs, the regulation sets a federal standard that limits employers to picking “one of the … base-benchmark plans selected by a State” (emphasis added). Under a waiver, a state would not be selecting a benchmark plan. Rather, a state would select their own EHB standard. Because this state specified EHB is not a benchmark plan under the federal standard, a large employer could not pick it.

According to a set of Frequently Asked Questions published by Department of Labor, the same rule for how a large employer may define EHB applies in relation to caps on out-of-pocket spending. Thus, there is no back door in the House health care bill to lessen or eliminate restrictions on annual limits, lifetime limits, and out-of-pocket spending.

So what if it did?

Explaining in such detail why the MacArthur Amendment does not allow employers to sidestep these ACA requirements risks validating that this would be a “huge” deal if it did. If anything, freeing employers from these requirements would benefit workers.

These requirements raise the cost of health benefits and that must be paid for somehow. Economists tend to agree that it’s the worker that ends up paying in the form a lower wages or benefit reductions elsewhere. To the extent workers prefer higher wages and other benefits, the restrictions on annual limits, lifetime limits, and out-of-pocket spending make them worse off.

Ultimately, Obamacare had little impact on large employers because these employers already offered good health coverage as an incentive to attract quality workers. Any Obamacare repeal will, therefore, not be a huge deal for anyone working for a large employer.