Graham Cassidy § 105 would repeal the ACA “employer mandate”. Although its sponsors claim that the bill will give states a great deal of flexibility, it will do nothing to help states ensure that employers provide their employees with decent health insurance; quite the reverse. It will also give employers the freedom to ignore the popular ACA requirement that allows children up to age 26 to receive coverage through their parent’ plans, at least when their parents get health insurance from their employers. Here’s why.
The Affordable Care Act (ACA) was designed to foster and build on health insurance plans that employers in the US provide to their employees. With limited exceptions such as provisions about wellness plans, it left in place the Employee Retirement Income Security Act of 1974 (ERISA), the federal statute that governs benefits that employers offer their employees. Rather than amending ERISA to place new federal requirements on employer-provided plans, ACA imposed a tax penalty (called a “shared responsibility payment”) on employers (with at least 50 full-time equivalent employees) with employees who receive tax credits for purchasing insurance through the ACA exchanges. This is the ACA “employer mandate,” aimed to deter employers from dumping their existing health care plans. It is the ACA provision that supported the mantra: “you’ll get to keep the insurance you have.” This mandate is imposed through a tax and otherwise leaves in place the regulatory vacuum created by ERISA. Let me explain how.
ERISA, enacted in 1974, is the federal statute that governs employee “welfare” plans: benefits, including health benefits, that employers offer their employees. Although ERISA imposes quite substantial requirements on pension plans, it imposes only disclosure and fiduciary responsibilities on welfare plans. Employers must state clearly for their employees what they are given—but may also reserve the right to change plans, as long as they tell their employees that they might do this. Employers also must manage their plans as a good fiduciary would, but this does not mean that employers must offer minimum benefits to their employees, or indeed any benefits at all. Read More