Lawmakers Introduce Bill Preempting ACA Union Plan Exemption

Senators John Thune (R-SD), Lamar Alexander (R-TN) and Orrin Hatch (R- UT) introduced a bill (S. 1724) yesterday that would prevent the administration from exempting multi-employer health plans from a $63 reinsurance fee the Affordable Care Act (ACA) will impose on each enrollee in self-funded and fully-insured health plans beginning in 2014 through 2016.  Unions – whose members typically rely on multi-employer health insurance plans – have been vocal in their criticism of provisions of the ACA.

The reinsurance fee established under ACA Section 1341 was designed to mitigate the risk to insurance companies of signing up too few enrollees in the ACA exchange plans or of signing up too few young and healthy individuals in the plans. On October 30, 2013, the U.S. Department of Health and Human Services published a rule finalizing a number of policies related to the implementation of the Affordable Care Act, including provisions regarding the reinsurance fee. In the final rule, the Agency stated that it intends to propose further rulemaking that would exempt “self-insured, self-administered” group health plans from the requirement to pay the reinsurance fee for the 2015 and 2016 benefit years. The proposal is widely viewed as a carve-out for multiemployer plans.

According to a press release, Senator Thune stated that: “Unions should not be granted a special exemption from ObamaCare’s reinsurance tax just because the president fears further union backlash on his signature law.” To this end, bill would prevent the Administration from providing the fix that would exempt union plans from the reinsurance tax. Specifically, the bill  includes the following provision:


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.

The legislation follows a letter sent by the bill’s sponsors to the White House, Office of Management and Budget, stating that the regulation in question “makes no justification as to why union members should be exempted from this fee while other similarly situated organizations (and ultimately, their beneficiaries) must continue to pay it.”   

Update: On December 12, 2013, Rep. Perry Scott (R-PA) introduced companion legislation (H.R. 3755) in the House of Representatives.

Information contained in this publication is intended for informational purposes only and does not constitute legal advice or opinion, nor is it a substitute for the professional judgment of an attorney.