Insurers Relieved as ‘Skinny’ Health Bill Fails but Warn of Rising Rates, Exits From Exchanges

Without Federal Government payments, insurers say premiums will be far higher, and companies may pull out of exchanges

The Capitol stayed open as the Republican majority in Congress remains stymied by their inability to fulfill their political promise to repeal and replace Obamacare.
The Capitol stayed open as the Republican majority in Congress remains stymied by their inability to fulfill their political promise to repeal and replace Obamacare. PHOTO: CLIFF OWEN/ASSOCIATED PRESS

July 28, 2017 4:48 a.m. ET

Senate Republicans’ failure to pass their limited health bill is a relief for health insurers, but it leaves the companies struggling with increasingly urgent questions as they make decisions about participating in the Affordable Care Act’s exchanges.

Insurers had already been pressing for legislation aimed at stabilizing the marketplaces, an idea that is likely to now move into the spotlight with the apparent collapse of Republicans’ efforts to repeal the ACA, also known as Obamacare. But it’s not clear that any bill can move forward fast enough to affect the markets for next year, as insurers must file rates by mid-August and make final decisions about participation by late September.

“We really are right now up against it, as far as the deadline is concerned,” said Gary Cohen, a vice president at Blue Shield of California. Even if lawmakers from both parties work to pull together a bill to bolster the exchanges, “my concern is that for 2018, it’s going to be too late.”

The industry had opposed the Senate bill voted down early Friday partly because it would kill the ACA’s requirement for individuals to have insurance, which they say is important in prodding young, healthy enrollees into the markets. However, many companies have said that even if Congress never formally repeals the coverage mandate, they fear the Trump administration won’t strongly enforce it—or consumers will ignore it, figuring that it will likely be toothless.

President Donald Trump likely added to the industry’s alarm with a Friday-morning tweet in which he wrote: “As I said from the beginning, let ObamaCare implode, then deal. Watch!”

Insurers have been equally focused on other policy moves that they say are vital to propping up the exchanges. Most urgently, they want a guarantee that the federal government will continue making payments that reduce out-of-pocket costs for low-income ACA enrollees. Without those payments, insurers say that premiums will be far higher, and more companies may simply pull out of the exchanges. The industry also wants new funding aimed at blunting the cost of covering the sickest consumers.

With their ideas getting little traction so far in Congress, insurers have been issuing increasingly-public warnings about the consequences of inaction.

Late Thursday, before the Senate vote, Daniel J. Hilferty, chief executive of Independence Blue Cross, said the insurer is now “for the first time, asking, if the [cost-sharing funds] aren’t paid and the individual mandate isn’t enforced, are we going to be in the markets.” Independence is the only exchange insurer in the Philadelphia area and Mr. Hilferty is a prominent voice in the industry, serving as chairman of the Blue Cross Blue Shield Association.

The company hasn’t made a final decision, but it would “strongly consider not participating” in the exchanges without the cost-sharing payments and enforcement of the mandate, he said. “It just really begs the question, is this marketplace sustainable.” Independence has asked for a rate increase of around 8.5% on average for next year for its Pennsylvania marketplace plans, and the loss of the cost-sharing payments would add about 4.5 percentage points to that, while lack of enforcement of the mandate would add another 17 percentage points, he said.

Anthem Inc . , which has around 1.5 million ACA-plan enrollees, said Wednesday during a call with analysts that if it doesn’t quickly get more certainty about the future of the exchanges, it will likely further pull back its planned participation for next year. Chief Executive Joseph R. Swedish said that without greater clarity, particularly around the cost-sharing payments, “we will need to revise our rate filings to further narrow our level of participation.” He added that the insurer may make decisions “in a relatively short period of time” and in September at the latest.

Anthem, which has already disclosed plans to leave three of the 14 state exchanges where it offers plans, also said that if the cost-sharing payments are killed, it will need to seek rate increases of around 18% to 20% on exchange plans. The insurer said those increases would come on top of significant hikes it is already requesting, which it said were 20% or more.

A number of insurers, including Anthem, have already cited uncertainty around the future of the marketplaces as a major factor in already-announced decisions to pull back or exit exchanges in 2018. Such moves have left an estimated 38 counties in Nevada, Indiana and Ohio at risk of having no exchange insurers next year, according to the Kaiser Family Foundation.

Among insurers so far planning to remain in the exchanges, many already assumed in their 2018 rate requests that the cost-sharing payments won’t be locked in, and the mandate may not be enforced. Oliver Wyman, a consulting unit of Marsh & McLennan ,has projected that premiums might be roughly 9% higher on average if the mandate weren’t enforced, while the loss of the cost-sharing payments might mean an 11% to 20% boost.

In some rate filings that have already become public, insurers offered different estimates. Blue Cross and Blue Shield of North Carolina said that of its 22.9% proposed increase for 2018, 14.1 percentage points were from assumed loss of the cost-sharing payments. BlueCross BlueShield of Tennessee said that of its 21% boost, about 14 percentage points were tied to the lack of cost-sharing payments and 7 percentage points to the loss of enforcement of the mandate.

Insurers say the worry is that such significant rate increases might create a cascading dynamic, as more healthy people leave the market, pushing rates up even more in the future for the shrinking pool of increasingly unhealthy enrollees. Actuaries say this effect might be blunted by the ACA’s premium subsidies, since those protect many consumers from bearing the full brunt of rate increases.

Write to Anna Wilde Mathews at



Preparing for Form 5500 deadlines

The lazy days of summer are upon us, but before you head out on that much-deserved vacation, remember to get your Employee Retirement Income Security Act reporting affairs in order.

For plan sponsors maintaining any ERISA plan on a calendar year basis, now is the time to ensure that either your Form 5500 will be filed by July 31, 2017, or an extension will be filed by that date. While these filings are often handled by you or your staff — or outsourced — a few reminders on Form 5500 best practices couldn’t hurt.

File your extension as early as possible. An extension of time to file a Form 5500 is not necessarily automatic. While a request for an extension will be automatically granted for a timely filed request, the request for an extension (Form 5558) generally must be filed unless the plan year and the employer’s tax year are the same; and an extension to file the employer’s federal tax return has been granted to a date later than the Form 5500 due date.

When in doubt as to whether these elements have been met, filing a Form 5500 extension (on Form 5558) may be best practice.

File a Form 5558 for each plan. For example, if you file multiple Form 5500s, you must file multiple Form 5558s. In the health and welfare arena, have you considered “wrapping” your plans into a single plan to reduce the associated filing burden?

Remember that insurance policy years (i.e., the time for a renewal) may differ from ERISA plan years. If your health and welfare plans renew on a fiscal year, your ERISA plan may still be on a calendar year track.

Bloomberg/file photo

The ERISA plan documentation will specify the plan year on which it operates. If you aren’t sure — or don’t know if you have an ERISA plan document — ask.

Ask yourself if you are status has changed? Here’s a reminder for emerging organizations: you cannot assume that because you did not need to file all or part of a Form 5500 last year, you will not need to do it next year. As a rule of thumb, 100 participants is the “magic number.”

Reaching 100 participants precipitates a filing requirement for unfunded health and welfare plans. If you’re covering non-employee participants (e.g., spouses and dependents), then you need to carefully monitor the number of participants year over year.

Whether a plan has more or less than 100 participants governs whether a Form 5500-SF can be used. Note that for a small “pension” plan which, when used in this context includes a 401(k) and 403(b) plan, this number will largely drive whether the plan is exempt from the audit or accountant’s report requirement.

The size of your plan
Remember the grace period rule for plans with between 80 and 120 participants. If the plan falls in that window and a Form 5500 annual return/report was filed for the prior plan year, you may elect to complete the return/report in the same category (‘‘large plan’’ or ‘‘small plan’’) as was filed for the prior year.

Know thy plan. As a plan administrator, you should be wary of being too cavalier and assuming that your plan is not subject to ERISA (and the corresponding Form 5500 reporting requirement). An audit or a lawsuit is a less than ideal time to first realize that your severance, top hat, with no accompanying notice, employee assistance program, or other arrangement is actually an ERISA plan.

Late filings may be correctable under the Delinquent Filer Voluntary Correction Program if discovered before the plan is under written notice from the Department of Labor concerning its delinquency. Pursuing correction under this amnesty program may yield significant savings compared to those civil penalties assessable under audit.

Remembering these rules and tips about filing an ERISA extension could save you and your firm the hassle of dealing with fines and bad press. A little work now could also allow you to enjoy your summer vacation with some peace of mind.

  • July 26 2017, 12:27pm EDT


Carrie Byrnes

Byrnes is a partner in Michael Best & Friedrich LLP’s Employee Benefits Group practicing exclusively in employee benefits and executive compensation law.

Jorge M. Leon

Leon is a partner in Michael Best & Friedrich LLP’s Employee Benefits Group.

John McCain to Return to the Senate on Tuesday as Health Vote Looms

Return had been rumored Monday and follows last week’s cancer diagnosis


WASHINGTON—Sen. John McCain (R., Ariz.), who has been absent from the Senate for more than a week recovering from surgery, will return on Tuesday, when the chamber is set to vote on whether to open debate on dismantling the Affordable Care Act.

Mr. McCain’s return had been rumored all day, but his colleagues said the decision was in the hands of his doctors at Mayo Clinic Hospital in Phoenix. Mr. McCain had surgery on July 14 to remove a blood clot and was left with an incision above his left eye. The blood clot was associated with a tumor known as a glioblastoma. Mr. McCain’s colleagues said it wasn’t clear whether the incision had healed to the point that he could sit in a pressurized cabin for the flight back to Washington.

“Senator McCain looks forward to returning to the United States Senate tomorrow to continue working on important legislation, including health care reform, the National Defense Authorization Act, and new sanctions on Russian, Iran and North Korea,” said a statement Monday night from Mr. McCain’s office.

July 24, 2017 9:47 p.m. ET

Write to Siobhan Hughes at

Insurers Brace for New Uncertainty

BN-UI359_32ftU_OR_20170718152411Companies worry about the future of federal funding and the Affordable Care Act’s individual mandate

For the health-care system, it’s back to square one.

Insurers, hospitals and state officials are facing the prospect that the Affordable Care Act will remain the law of the land for now at least, but they also are left with huge questions about how key aspects of the law will be handled under the Trump administration as deadlines loom for insurers’ decisions about next year.

The collapse of Republicans’ overhaul effort spares health companies and states major cutbacks in Medicaid that many had opposed. That means a major source of the coverage gains under the ACA is likely to remain intact for the foreseeable future, a boon for hospitals, doctors and officials in states that chose to expand the program.

The bill would have “ended Medicaid as we know it,” said John Jurenko, vice president of government relations at NYC Health & Hospitals, which runs New York City’s 11 public hospitals. That relief was temporary, he said, as he considered the continuing uncertainty. “I was very happy for a few minutes,” he said. “We need to be vigilant.”

For insurers, the results are mixed. They fought to kill a provision in the latest Senate billthat they said would have blown up the ACA’s marketplaces, but they supported Republicans’ efforts to kill the law’s tax on health-insurance plans.

Insurers said they still face major uncertainty about how the ACA will be administered going forward. “We have to make business decisions here, and it’s like, ‘is it going to be A or B?’” said John Baackes, chief executive of L.A. Care Health Plan, which offers exchange coverage as well as Medicaid. “You can’t operate that way.”

The impact will likely play out differently in different places, depending on state policies and market realities.

Companies are now calling for fast efforts to provide more certainty and stability in the marketplaces, which are strained in several states as insurers are pulling back and seeking large rate increases for next year. In an estimated 38 counties across Nevada, Indiana and Ohio, no insurer has yet agreed to offer coverage through an exchange next year.

Most immediately, companies offering health plans in the ACA’s exchanges are concerned key federal payments that help reduce health-care costs for low-income enrollees may now be halted, as President Donald Trump has threatened in the past. The Senate bill would have locked them in for 2018 and 2019. The president raised their alarm with a tweet on Tuesday suggesting, “let ObamaCare fail and then come together and do a great healthcare plan. Stay tuned!”

“If he wants to destroy Obamacare, all he has to do is stop” the payments, said Jerry Dworak, chief executive of Montana Health Co-op, a nonprofit offering marketplace plans in Montana and Idaho. “That would probably end it right there. I don’t know if he’s bluffing.”

Montana Health Co-op proposed only about a 4% rate increase on marketplace plans in its home state for next year, Mr. Dworak said, but that would have to increase by around 20 percentage points if the cost-sharing payments ceased.

The Blue Cross Blue Shield Association said that, “with open enrollment for 2018 only three months away, our members and all Americans need the certainty and security of knowing coverage will be available and affordable for them,” and the cost-sharing payments must have “certain funding.” The group also said it supported federal and state moves to “stabilize insurance markets in the short term.”

Insurers said they also need firmer direction about the future enforcement of the ACA’s individual mandate for people to have insurance. Many insurers fear consumers will assume because of Republican efforts that the requirement is no longer being enforced, even though no law repealing it has passed, leading younger, healthier people to avoid marketplace plans.

“I’d like to see clarity” around the mandate, said Diane P. Holder, chief executive of UPMC Health Plan in Pittsburgh.

Senate Majority Leader Mitch McConnell (R., Ky.) had previously raised the prospect of working with Democrats on efforts to stabilize the marketplaces, and pressure for that outcome from the health-care industry and states is likely to rapidly grow.

A group of governors, including Ohio’s John Kasich, Nevada’s Brian Sandoval and Pennsylvania’s Tom Wolf, said in a statement Tuesday that “the best next step is for both parties to come together and do what we can all agree on: fix our unstable insurance markets.”

Hospital executives said they, too, are worried about seeing more patients losing coverage if the insurance marketplaces aren’t stabilized. Seeing more uninsured would strain hospital finances, said Robin Wittenstein, CEO of hospital operator Denver Health, who was in Washington on Tuesday to lobby Congress as the Senate’s legislative agenda rapidly shifted. “It would have a devastating effect,” she said.

In addition to funding for the cost-sharing payments, insurers would like to see funding for reinsurance to help manage the risk of covering costlier, sicker enrollees, and other steps.

Pamela Morris, chief executive of CareSource, a nonprofit that offers exchange plans in four states, said her company is considering offering plans in some counties in Indiana and Ohio that currently lack a marketplace insurer for 2018. Locking in the cost-sharing payments and a reinsurance program would “make it a win-win for us” to offer plans in those counties, she said. “That would seal the deal.”

Meanwhile, states are increasingly taking their own initiatives to bolster exchanges—reflecting the reality that the ACA has played out very differently in different places. In the states facing possible bare counties with no exchange insurers, officials are wooing companies to stick around. Other states’ marketplaces are in steadier condition.

“Every state out there is realizing that the worst scenario is a collapse of your individual markets,” said Mike Kreidler, Washington state’s insurance commissioner, who, like officials in many states, is working on a proposal to get a federal waiver to tweak aspects of the ACA. “You can’t just sit back and wait for bad things to happen.”

Alaska, which had been facing large rate increases and retains only one insurer in its exchange, recently won federal approval for an effort built around a reinsurance setup. Iowa is seeking a nod from federal officials for a more ambitious program that would rewrite large portions of the ACA in the state. Several other states are considering or moving forward on similar efforts.

“We will see a difference in states,” said Gary Cohen, a vice president at Blue Shield of California, a state that boasts an exchange that has been far more stable than many others. “The Obama administration took a more rigid view and were less welcoming to those state initiatives than the Trump administration has indicated it will be.”

Updated July 18, 2017 8:09 p.m. ET

Write to Anna Wilde Mathews at and Melanie Evans at

Appeared in the July 19, 2017, print edition as ‘Insurers See New Uncertainty After GOP Bill Fails.’

The Benefits of Utilizing a Competent Benefits Broker


Let’s face it, the task of choosing and administering employee benefits plans can be a headache for small, medium and large employers alike.  Many CEO’s, CFO’s and HR Directors cringe at just the mention of the phrase “RENEWAL TIME”.  It doesn’t have to be that way, and more importantly, should never be that way.

There are many different types of brokers out there and like most business relationships, employers might not know what they are missing because they don’t know the right questions to ask.  Here are some of the questions that should be considered before making the decision.

  • Will this broker help make my open enrollment process easier and more efficient?
    • BenEx works with every client through the entire process.  Start to finish.  We will come to your enrollment meeting to explain the plans and answer any questions your employees may have.
  • Will this broker actually help my company with any claims issues or will they just direct me to the insurance company?
    • We tell all of our potential clients, and our current clients will agree, that BenEx truly services all of our policies.  If you or one of your employees has an issue that you can’t resolve, give it to us so you can get back to what you do best.  Because taking care of our clients is one of the things we do best. 
  • Will this broker help me stay in compliance?
    • Compliance is a hot topic issue in the HR world today.  BenEx gives your company’s HR professionals valuable tools to keep your company in compliance.  
  • Does this broker help with more than just insurance?
    • There are some brokers that focus on insurance and insurance only.  BenEx prides ourselves on being a resource for so much more.  There are funny lists of the 101 different problems an HR Manager will handle every day.  The only person not laughing is that HR Manager because they actually DO have to wear so many different hats throughout the day.  Our innovative approach to the entire benefits package includes so much more than just insurance.  
  • Would this broker assign my company a dedicated account manager?
    • This is a very important question to consider.  When our clients call in for any issues, they all have a dedicated service representative that knows their file inside and out.  We strongly believe that a working business relationship built on trust and understanding goes a long way.
  • Does this broker have a good reputation and do they know what they are doing?
    • This question is sometimes overlooked during the decision process.  Don’t assume that just because an agent is licensed and able to sell insurance that they know what they are talking about.  BenEx has been in business for 20 years and we take pride in the reputation we’ve built.
  • Is this broker a “captive” agent or are they independent?
    • A captive agent is one that can only recommend plans and policies offered by their specific insurance company.  BenEx is an independent agent and we will make our plan recommendations based on what aligns best with the vision and goals of your company.  
  • Will this broker develop a customized plan to best fit my company’s needs?
    • The answer should be yes, yes, and absolutely YES!  No two companies are the same and likewise a competent broker will be able to develop customized plans that meet the needs of all your employees.

These are only a few of the questions that should be considered when choosing a broker.  This applies to companies that are currently working with a broker as well.  If your agent is not living up to their end of the bargain, it may be time to make a change.


BenefitsPro: 83% of employees want and would fully pay for voluntary benefits

  • A new BenefitsPro survey found that 83% of workers with healthcare coverage would enroll in a voluntary benefits program without expecting their employer to pay for it. Benefits Pro and an independent research firm surveyed employees at 200 companies to find out what drives their purchasing decisions.
  • The survey also found that 87% of employees offered voluntary benefits felt they mattered to their employers and 62% of employees under 50 wouldn’t consider working for a company that didn’t offer voluntary benefits.
  • Benefits Pro concluded that although voluntary benefits are costly, employees are willing to pay for them to get benefits that provide more financial security, better support for getting through a crisis or other personal needs.

The survey continues to suggest what other studies have also shown: that voluntary benefits are a win-win for employers and workers. Offering such benefits is one way for employers to defer some costs to employees but still provide the services they need.

BenefitsPro predicted in January that voluntary benefits would take center stage in 2017. Marketers say consumers in all markets like customization, which an array of benefits offers workers. Voluntary benefits are based on personal needs and lifestyles, and often are non-traditional. They range from cybersecurity insurance and financial counseling services to eldercare, tuition assistance and identity-theft protection.

Study results conclude that employers who offer voluntary benefits have a competitive advantage in talent recruitment and retention. For example, some tech companies offer infertility benefits, a non-traditional offering that many employees of child-bearing age might want. According to the Centers for Disease Control and Prevention, one in eight couples has trouble conceiving. Allied Market Research predicts that employers offering infertility coverage could see a return on their investment of 30%.

Employers may want to consider whether voluntary benefits might be a worthwhile investment for themselves and their workers.

Congress Moves to Stop I.R.S. From Enforcing Health Law Mandate

Representative Tom Graves, Republican of Georgia and chairman of the Financial Services and General Government subcommittee, which approved the I.R.S. provision, in June. CreditAstrid Riecken/Getty Images


WASHINGTON — Congress is moving to prevent the Internal Revenue Service from enforcing one of the more unpopular provisions of the Affordable Care Act, which requires most Americans to have health insurance or pay a tax penalty.

The plan is separate from Republican efforts to repeal the health care law, and appears more likely to be adopted because it would be written into the annual spending bill for the Treasury and the I.R.S.

But it has a similar purpose: to weaken the health law that President Trump and Republicans in Congress want to dismantle.

Congress has been working for months on a bill to repeal President Barack Obama’s health care law, including the coverage requirement. That provision, known as the individual mandate, is widely disliked, according to opinion polls.

In case that effort fails or bogs down, the House Committee on Appropriations has drafted a provision to stop the I.R.S. from enforcing the mandate. The restrictions, for the fiscal year that starts Oct. 1, are included in an appropriations bill that was approved on Thursday by the Subcommittee on Financial Services and General Government.

“None of the funds made available by this act may be used by the Internal Revenue Service to implement or enforce section 5000A of the Internal Revenue Code,” which imposes the tax penalty on people who go without insurance, the bill says.

The bill would also prohibit the I.R.S. from enforcing a requirement that employers and insurance companies inform the government of the name and Social Security number of anyone to whom they provide health insurance coverage. The government uses these reports to help administer the individual mandate and other requirements.

Representative Tom Graves, Republican of Georgia and chairman of the subcommittee, said the panel had produced “a very conservative bill that aligns closely with President Trump’s budget.” He said the bill would hold the budget of the I.R.S. “below the 2008 level” while providing money to improve its customer service and cybersecurity.

Garrett Hawkins, a spokesman for Mr. Graves, explained the reason for the restrictions by saying, “While Congress works to pass President Trump’s health care plan, stopping the I.R.S. from implementing the harmful individual mandate helps provide relief for the families suffering under Obamacare.”

The penalty for failing to maintain coverage is either a flat dollar amount or a specified percentage of household income, whichever is greater. For an individual with annual income of $40,000 and no coverage during the year, the penalty would be $741, according to a calculator on the I.R.S. website. For a couple with annual income of $90,000 and no insurance, the penalty would be $1,732.

Employers and insurers are supposed to file “information returns” identifying each person to whom they provide coverage. If they fail to do so, they too may be subject to penalties.

Aides to the Senate majority leader, Mitch McConnell, Republican of Kentucky, were working Monday on his bill to repeal major provisions of the Affordable Care Act, with the hope that they could meet objections from about one-fifth of his 52-member caucus. He has sent proposed revisions to the Congressional Budget Office for analysis.

To mollify moderate Republicans, he is considering restoring some money to Medicaid or keeping a tax on the investment income of the most affluent Americans. To satisfy conservatives, he is considering a proposal that would allow insurers to sidestep most federal insurance rules if they offer at least one health plan that complies with those standards.

Republicans in the Senate and the House generally agree on one thing: “The individual mandate has no place in a free society,” in the words of Representative Michael C. Burgess, Republican of Texas and a physician.

Many supporters of the Affordable Care Act, including Democrats in Congress, describe the individual mandate as an important part of the law. The law itself said the mandate would increase the number of healthy people buying insurance. Their premium payments help defray the cost of care for less healthy people and thus lower premiums in general, Congress said in 2010.

Using similar logic, the Congressional Budget Office said last week that repealing the individual mandate penalty, by itself, could lead to higher premiums. And many insurers cite uncertainty about the mandate as a reason for seeking rate increases for 2018.

The Obama administration went to the Supreme Court in a successful effortto defend the individual mandate, but the Trump administration has indicated that it is not planning aggressive enforcement. On his first day in office, Mr. Trump told agencies to use their discretion, “to the maximum extent permitted by law,” to waive or grant exemptions from any fee, tax or penalty imposed by the Affordable Care Act.

Less than a month later the I.R.S. said it would accept tax returns from people who did not provide the requested information about whether they had coverage. The agency had planned to reject such returns.

The I.R.S. commissioner, John A. Koskinen, said that 6.5 million taxpayers reported paying a total of $3 billion in penalties for not having coverage in 2015. In addition, 12.7 million taxpayers claimed exemptions from the coverage requirement, on account of hardship or other factors. And more than four million people filed “silent returns,” not paying a penalty, not indicating if they had coverage and not claiming an exemption.