Two days ago Senator Thune’s office sent out a press release about the Obama administration’s proposed rule to exempt Unions from the reinsurance tax. For those unfamiliar with the reinsurance tax here is a brief definition from the press release:
The ObamaCare reinsurance tax is scheduled to begin in 2014 and requires all self-insured plans to pay a tax for each person covered under a health plan. The tax was designed to provide funds to health care plans in the ObamaCare exchanges to help absorb the cost of care for people with pre-existing conditions.
Many Unions utilize what is known as Taft-Hatley plans. Taft-Hatley plans are multi-employer and usually industry specific. These plans are great for union workers that change employers often due to nature of their work. These plans also happen to be administered between the union and the employers; no third-party is usually involved. The lack of a third-party is where the problem comes from.
Here is the 42 U.S.C. 18061(b)(1)(A), the portion of ACA in question:
(b) Model regulation
(1) In general
In establishing the Federal standards under section 18041 (a) of this title, the Secretary, in consultation with the National Association of Insurance Commissioners (the “NAIC”), shall include provisions that enable States to establish and maintain a program under which—
(A) health insurance issuers, and third party administrators on behalf of group health plans, are required to make payments to an applicable reinsurance entity for any plan year beginning in the 3-year period beginning January 1, 2014 (as specified in paragraph (3);
This paragraph has the wording that allows Obama to give special favor to unions. According to this the reinsurance tax applies to “health insurance issuers” and “third party administrators”. It could technically be argued that Taft-Hatley plans do not fall under either of these categories. In fact here is the finding from the HSS in the Federal Register (p. 71):
Therefore, we propose that for the 2015 and 2016 benefit years, a “contributing entity” would mean: (a) a health insurance issuer; or (b) a self-insured group health plan (including a group health plan that is partially self-insured and partially insured, where the health insurance coverage does not constitute major medical coverage) that uses a third party administrator in connection with claims processing or adjudication (including the management of appeals) or plan enrollment. The proposed modification for the 2015 and 2016 benefit years would exclude from the obligation to make reinsurance contributions those self-insured plans that do not use a third party administrator for their core administrative processing functions – adjudicating, adjusting, and settling claims (including the management of appeals), and processing and communicating enrollment information to plan participants and beneficiaries.
Basically since self-insured plans without a third party administrator are not mentioned in 42 U.S.C. 18061(b)(1)(A) the HHS finds the reinsurance tax does not apply to those plans. Reading the text it isn’t hard to see how they are able to interpret it that way. I disagree with their interpretation, but that doesn’t mean their interpretation is wrong. The Obama administration actually appears to have found legal backing for giving special treatment to Union plans over other plans.
Thune explains in his newsletter why these Taft-Hatley plans would indeed be getting special treatment and why that is bad for other Americans:
The reinsurance tax, which is scheduled to begin in 2014, was designed to provide funds to health care plans in the ObamaCare exchanges to help absorb the cost of care for people with pre-existing conditions. This tax is scheduled to raise a total of $25 billion by 2016. If unions are granted this special carve out by the president, the burden will shift to all other self-insured plans, requiring them to pay more to meet the amount of revenue required by law.
I disagree that this was a “special carve out by the president”. Rather I believe this section is an ‘oops’ found by the Obama administration and being used to keep favor with Unions. Whether intentional or not, the removal of self-insured plans without administrators means the reinsurance tax will take in much less revenue than projected. With less revenue coming in it will mean the costs of ACA will have to be made up in other places.
Another option would be to add self-insured plans without a third party administrator to the reinsurance tax. That is what Thune is trying to do with the Union Tax Fairness Act 0f 2013 (S. 1724). Here is Section 2 of the bill:
Notwithstanding any other provision of law, the payments required to be made by health insurance issuers and third party administrators (on behalf of group health plans) under section 1341(b)(1)(A) of the Patient Protection and Affordable Care Act (42 U.S.C. 18061(b)(1)(A)) shall be applied equally to all such issuers and administrators and may not be waived on behalf of any such issuer, administrator or group health plan.
I’m not sure this would ‘fix’ the problem. Nothing in Thune’s bill directly addresses the self-insured group plans without a third party administrator. I think to actually ‘fix’ the problem Thune has to add language for self-insured group plans without a third party administrator. Thune’s bill seems aimed at preventing the Obama administration from waiving groups having to pay the reinsurance group. The approach being taken by the Obama administration is not about waiving the law for a special group; rather the approach being taken by the Obama administration is that self-insured group plans without a third party administrator are not included in this portion of the law. Thune needs to address this issue before pushing too hard for this bill, or he will simply be pushing a bill that reinforces what is already in the law.
Hopefully DC politicians will find a way to make the reinsurance tax apply equally to all groups. But I have no hope that will happen. Obama wants to reduce the cost for Unions going into the 2014 election, so he will get it. There is very little anyone can do about it. Taking the matter to court will end up in a DC Federal Court; which recently Senator Reid went nuclear on the filibuster so Obama could add three unnecessary judges (who also are likely loyal to the Obama administrations goals). Right now I still feel the best tool against Obamacare will be nullification at the state level. We simply can’t expect DC to keep from giving special treatment to large lobbying groups (such as Unions).