[House Report 118-107]
[From the U.S. Government Publishing Office]
118th Congress } { Report
HOUSE OF REPRESENTATIVES
1st Session } { 118-107
======================================================================
CUSTOM HEALTH OPTION AND INDIVIDUAL CARE
EXPENSE ARRANGEMENT ACT
_______
June 12, 2023.--Committed to the Committee of the Whole House on the
State of the Union and ordered to be printed
_______
Mr. Smith of Missouri, from the Committee on Ways and Means, submitted
the following
R E P O R T
together with
DISSENTING VIEWS
[To accompany H.R. 3799]
The Committee on Ways and Means, to whom was referred the
bill (H.R. 3799) to amend the Internal Revenue Code of 1986 to
provide for health reimbursement arrangements integrated with
individual health insurance coverage, having considered the
same, reports favorably thereon with an amendment and
recommends that the bill as amended do pass.
CONTENTS
Page
I. SUMMARY AND BACKGROUND...........................................4
A. Purpose and Summary................................. 4
B. Background and Need for Legislation................. 4
C. Legislative History................................. 4
D. Legislative History................................. 5
II. EXPLANATION OF THE BILL..........................................5
A. Treatment of Health Reimbursement Arrangements
Integrated with Individual Market Coverage (sec. 2
of the bill and sec. 9815 of the Code)............. 5
III. VOTE OF THE COMMITTEE...........................................10
IV. BUDGET EFFECTS OF THE BILL......................................11
A. Committee Estimate of Budgetary Effects............. 11
B. Statement Regarding New Budget Authority and Tax
Expenditures Budget Authority...................... 11
C. Cost Estimate Prepared by the Congressional Budget
Office............................................. 11
V. OTHER MATTERS TO BE DISCUSSED UNDER THE RULES OF THE HOUSE......11
A. Committee Oversight Findings and Recommendations.... 11
A. Statement of General Performance Goals and
Objectives......................................... 11
B. Information Relating to Unfunded Mandates........... 11
C. Congressional Earmarks, Limited Tax Benefits, and
Limited Tariff Benefits............................ 12
D. Tax Complexity Analysis............................. 12
E. Duplication of Federal Programs..................... 12
VI. CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED...........12
A. Changes in Existing Law Proposed by the Bill, as
Reported........................................... 12
VII. DISSENTING VIEWS................................................17
The amendment is as follows:
Strike all after the enacting clause and insert the
following:
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Custom Health Option and Individual
Care Expense Arrangement Act'' or the ``CHOICE Arrangement Act''.
SEC. 2. TREATMENT OF HEALTH REIMBURSEMENT ARRANGEMENTS INTEGRATED WITH
INDIVIDUAL MARKET COVERAGE.
(a) In General.--Section 9815(b) of the Internal Revenue Code of 1986
is amended--
(1) by striking ``Exception.--Notwithstanding subsection
(a)'' and inserting the following: ``Exceptions.--
``(1) Self-insured group health plans.--Notwithstanding
subsection (a)'', and
(2) by adding at the end the following new paragraph:
``(2) Custom health option and individual care expense
arrangements.--
``(A) In general.--For purposes of this subchapter, a
custom health option and individual care expense
arrangement shall be treated as meeting the
requirements of section 2711 and 2713 of title XXVII of
the Public Health Service Act.
``(B) Custom health option and individual care
expense arrangements defined.--For purposes of this
section, the term `custom health option and individual
care expense arrangement' means a health reimbursement
arrangement--
``(i) which is an employer-provided group
health plan funded solely by employer
contributions to provide payments or
reimbursements for medical care subject to a
maximum fixed dollar amount for a period,
``(ii) under which such payments or
reimbursements may only be made for medical
care provided during periods during which the
individual is covered--
``(I) under individual health
insurance coverage (other than coverage
that consists solely of excepted
benefits), or
``(II) under part A and B of title
XVIII of the Social Security Act or
part C of such title,
``(iii) which meets the nondiscrimination
requirements of subparagraph (C),
``(iv) which meets the substantiation
requirements of subparagraph (D), and
``(v) which meets the notice requirements of
subparagraph (E).
``(C) Nondiscrimination.--
``(i) In general.--An arrangement meets the
requirements of this subparagraph if an
employer offering such arrangement to an
employee within a specified class of employee--
``(I) offers such arrangement to all
employees within such specified class
on the same terms, and
``(II) does not offer any other group
health plan to any employees within
such specified class.
``(ii) Specified class of employee.--For
purposes of this subparagraph, any of the
following may be designated as a specified
class of employee:
``(I) Full-time employees.
``(II) Part-time employees.
``(III) Salaried employees.
``(IV) Non-salaried employees.
``(V) Employees whose primary site of
employment is in the same rating area.
``(VI) Employees who are included in
a unit of employees covered under a
collective bargaining agreement to
which the employer is subject
(determined under rules similar to the
rules of section 105(h)).
``(VII) Employees who have not met a
group health plan, or health insurance
issuer offering group health insurance
coverage, waiting period requirement
that satisfies the of section 2708 of
the Public Health Service Act.
``(VIII) Seasonal employees.
``(IX) Employees who are nonresident
aliens and who receive no earned income
(within the meaning of section
911(d)(2)) from the employer which
constitutes income from sources within
the United States (within the meaning
of section 861(a)(3)).
``(X) Such other classes of employees
as the Secretary may designate.
An employer may designate (in such manner as is
prescribed by the Secretary) two or more of the
classes described in the preceding subclauses
as the specified class of employees to which
the arrangement is offered for purposes of
applying this subparagraph.
``(iii) Special rule for new hires.--An
employer may designate prospectively so much of
a specified class of employees as are hired
after a date set by the employer. Such subclass
of employees shall be treated as the specified
class for purposes of applying clause (i).
``(iv) Rules for determining type of
employee.--For purposes for clause (ii), any
determination of full-time, part-time, or
seasonal employment status shall be made under
rules similar to the rules of section 105(h) or
4980H, whichever the employer elects for the
plan year. Such election shall apply with
respect to all employees of the employer for
the plan year.
``(v) Permitted variation.--For purposes of
clause (i)(I), an arrangement shall not fail to
be treated as provided on the same terms within
a specified class merely because the maximum
dollar amount of payments and reimbursements
which may be made under the terms of the
arrangement for the year with respect to each
employee within such class--
``(I) increases as additional
dependents of the employee are covered
under the arrangement, and
``(II) increases with respect to a
participant as the age of the
participant increases, but not in
excess of an amount equal to 300
percent the lowest maximum dollar
amount with respect to such a
participant determined without regard
to age.
``(D) Substantiation requirements.--An arrangement
meets the requirements of this subparagraph if the
arrangement has reasonable procedures to substantiate--
``(i) that the participant is, or will be,
enrolled in coverage described in subparagraph
(B)(ii) as of the beginning of the plan year of
the arrangement (or as of the beginning of
coverage under the arrangement in the case of
an employee who first becomes eligible to
participate in the arrangement after the date
notice is given with respect to the plan under
subparagraph (E) (determined without regard to
clause (iii) thereof), and
``(ii) any requests made for payment or
reimbursement of medical care under the
arrangement and that the participant remains so
enrolled.
``(E) Notice.--
``(i) In general.--Except as provided in
clause (iii), an arrangement meets the
requirements of this subparagraph if, under the
arrangement, each employee eligible to
participate is, not later than 90 days before
the beginning of the plan year, given written
notice of the employee's rights and obligations
under the arrangement which--
``(I) is sufficiently accurate and
comprehensive to appraise the employee
of such rights and obligations, and
``(II) is written in a manner
calculated to be understood by the
average employee eligible to
participate.
``(ii) Notice requirements.--Such notice
shall include such information as the Secretary
may by regulation prescribe.
``(iii) Notice deadline for certain
employees.--In the case of an employee--
``(I) who first becomes eligible to
participate in the arrangement after
the date notice is given with respect
to the plan under clause (i)
(determined without regard to this
clause), or
``(II) whose employer is first
established fewer than 120 days before
the beginning of the first plan year of
the arrangement,
the requirements of this subparagraph shall be
treated as met if the notice required under
clause (i) is provided not later than the date
the arrangement may take effect with respect to
such employee.''.
(b) No Inference.--To the extent not inconsistent with the amendments
made by this section--
(1) no inference shall be made from such amendments with
respect to the rules prescribed in the Federal Register on June
20, 2019, (84 Fed. Reg. 28888) relating to health reimbursement
arrangements and other account-based group health plans, and
(2) any reference to custom health option and individual care
expense arrangements shall for purposes of such rules be
treated as including a reference to individual coverage health
reimbursement arrangements.
(c) Effective Date.--The amendments made by this section shall apply
to plan years beginning after December 31, 2023.
I. SUMMARY AND BACKGROUND
A. Purpose and Summary
The bill, H.R. 3799, the ``Custom Health Option and
Individual Care Expense Arrangement Act,'' as ordered reported
by the Committee on Ways and Means on June 7, 2023, codifies a
2019 rule (26 CFR 54.9802-4) which allows employers to offer
their employees tax-advantaged funds for their employees to
purchase qualified health insurance plans on the individual
market through ``CHOICE Arrangements''.
B. Background and Need for Legislation
26 CFR 54.9802-4 allows employers to offer tax-exempt,
defined contributions to their employees for the employees to
purchase qualified health insurance on the individual market
through Individual Coverage Health Reimbursement Arrangements
(ICHRAs). Unlike Qualified Small Employer Health Reimbursement
Arrangements (PL 114-255), these accounts do not have
restrictions on business size or annual contribution limits.
Additionally, ICHRAs may be offered to different classes of
employees, such as part-time, full-time, or seasonal employees,
while ensuring discrimination protections for the groups of
employees.
While this coverage option is valuable to employers, this
was created through administrative rulemaking and not
legislation. The Committee believes legislation is needed to
codify this important health coverage option so employers can
be confident the option will be permanent.
C. Legislative History
Background
H.R. 3799 was introduced on June 5, 2023, and was referred
to the Committee on Ways and Means.
Committee hearings
On Thursday, March 23, 2023, the Ways and Means
Subcommittee on Health held hearing on ``Why Health Care is
Unaffordable: The Fallout of Democrats' Inflation on Patients
and Small Businesses''.
Committee action
The Committee on Ways and Means marked up H.R. 3799, the
``Custom Health Option and Individual Care Expense Arrangement
Act,'' on June 7, 2023, and ordered the bill, as amended,
favorably reported (with a quorum being present).
D. Legislative History
Pursuant to clause 3(c)(6) of rule XIII, the following
hearings were used to develop and consider H.R. 3799:
Committee on Ways and Means Subcommittee on Health ``Why
Health Care is Unaffordable: The Fallout of Democrats'
Inflation on Patients and Small Businesses''.
II. EXPLANATION OF THE BILL
A. Treatment of Health Reimbursement Arrangements Integrated With
Individual Market Coverage (sec. 2 of the bill and sec. 9815 of the
code)
PRESENT LAW
Group health plan requirements
The Internal Revenue Code (the ``Code'') imposes various
requirements with respect to employment-related health plans,
referred to for this purpose as group health plans.\1\ The
Patient Protection and Affordable Care Act (``PPACA'')\2\
expanded the market reform requirements applicable to group
health plans.\3\
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\1\See, e.g., sec. 4980B (relating to continuation coverage or
``COBRA'' requirements) and Chapter 100 (secs. 9801-9834, relating to
various additional requirements, such as prohibitions on preexisting
condition exclusions and discrimination based on health status). Code
section 5000 also imposes Medicare secondary payor requirements on
group health plans.
\2\Pub. L. No. 111-148, March 23, 2010, as amended by the Health
Care and Education Reconciliation Act of 2010, Pub. L. No. 111-152,
March 30, 2010.
\3\See, e.g., sections 2711 and 2713 of the PPACA. These provisions
of the PPACA are incorporated into the Code through section 9815.
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Under the Code, an employer is generally subject to an
excise tax of $100 a day per employee if it sponsors a group
health plan that fails to meet any of these requirements.\4\
Generally, if the failure is due to reasonable cause and not to
willful neglect, the maximum tax that can be imposed for
failures during a taxable year is the lesser of 10 percent of
the employer's group health plan expenses for the prior year or
$500,000. In some cases, the excise tax does not apply if the
failure is due to reasonable cause and not to willful neglect
and the failure is corrected within a certain period. In
addition, in some cases in which failure is due to reasonable
cause and not to willful neglect, some or all of the excise tax
may be waived to the extent payment of the tax would be
excessive relative to the failure involved.
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\4\Section 4980B(a) and (b) apply to a violation of the COBRA
requirements, subject to an exception for plans of employers with fewer
than 20 employees. Section 4980D(a) and (b) apply to a violation of the
requirements under Chapter 100, subject to an exception for a plan of
an employer with no more than 50 employees if coverage is provided
solely through insurance. In some cases, a party other than the
employer, such as a multiemployer plan, may be liable for the tax. For
simplicity, this document refers to ``employers'' to indicate all such
entities that may sponsor group health plans.
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Other health rules under the Code
Under the PPACA, ``minimum essential coverage'' includes
employer-sponsored coverage under a group health plan, other
than certain types of limited coverage, such as coverage only
for vision or dental medical services.\5\ Minimum essential
coverage also includes coverage purchased in the individual
insurance market, other than certain types of limited coverage,
such as coverage only for vision or dental medical services.
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\5\Sec. 5000A.
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An advanceable, refundable income tax credit, the premium
tax credit (``PTC''), is available to certain individuals who
purchase health insurance coverage in the individual market
through an Exchange (``Exchange coverage'').\6\ However, an
employee is generally not eligible for the PTC if his or her
employer offers affordable minimum essential coverage under a
group health plan and the coverage provides minimum value. For
this purpose, coverage is affordable if the employee's share of
the premium for self-only coverage under the group health plan
is not more than 9.12 percent (for 2023)\7\ of the employee's
household income. To provide minimum value, the coverage
offered under the group health plan must cover at least 60
percent of the total costs of benefits covered under the plan.
An individual who applies for advance PTC with respect to
Exchange coverage for a year must provide the Exchange with
certain information, including information relating to
employer-provided minimum essential coverage.\8\
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\6\Sec. 36B. An Exchange is established under section 1311 of the
PPACA. Lower-income individuals who are eligible for PTCs and enrolled
in health insurance coverage purchased on an Exchange may also be
eligible for cost-sharing reductions under section 1402 of the PPACA.
\7\Rev. Proc. 2022-34, 2022-33 I.R.B. 143. This percentage is
updated as needed to reflect cost-of-living changes.
\8\Sec. 1411(b) of the PPACA. This information is subject to
verification during the Exchange process under section 1411(c) and (d)
of the PPACA.
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If an applicable large employer fails to offer employees
minimum essential coverage, or offers minimum essential
coverage that either is not affordable (under the standard
described above) or fails to provide minimum value, and any
employee is allowed PTC, the employer may be subject to a tax
penalty.\9\ For this purpose, applicable large employer
generally means, with respect to a calendar year, an employer
that employed an average of at least 50 full-time employees
(including full-time equivalents) on business days during the
preceding calendar year.\10\
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\9\Sec. 4980H.
\10\In determining whether an employer is an applicable large
employer (that is, whether the employer has at least 50 full-time
employees), besides the number of full-time employees, the employer
must include the number of its full time equivalent employees for a
month, determined by dividing the aggregate number of hours of service
of employees who are not full-time employees for the month by 120. In
addition, in determining applicable large employer status, members of
the same controlled group, group under common control, and affiliated
service group under section 414(b), (c), (m) and (o) are treated as a
single employer.
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Health reimbursement arrangements
In addition to offering health coverage, employers
sometimes reimburse medical expenses of their employees (and
their spouses and dependents). These arrangements are sometimes
used by employers to pay or reimburse employees for medical
expenses that are not covered by health insurance and are
commonly referred to as health reimbursement arrangements
(``HRAs'').\11\
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\11\See secs. 105(b) and 106; Rev. Rul. 61-146, 1961-2 C.B. 25;
Notice 2002-45, 2002-2 C.B. 93, July 15, 2002, and Rev. Rul. 2002-41,
2002-2 C.B. 75. Under section 105(h), a self-insured HRA must meet
certain nondiscrimination requirements in order for the benefits
provided to a highly compensated individual to be excluded from income.
For this purpose, the following groups of employees may be excluded:
employees who have not completed three years of service with the
employer, employees under age 25, part-time or seasonal employees,
employees covered by a collective bargaining agreement if health
benefits were the subject of good faith bargaining, and nonresident
aliens with no earned income from sources within the United States.
Employer payments and reimbursements for health insurance and medical
expenses are also excluded from wages for employment tax purposes.
Secs. 3121(a)(2), 3231(e)(1), 3306(b)(2), 3401(a)(20), Rev. Rul. 56-
632, 1956-2 C.B. 101. For simplicity, this document refers to ``HRAs''
to indicate all arrangements to which the individual coverage HRA final
rules (described later in this document) apply.
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The amounts in an HRA can be used only to reimburse medical
expenses (including health insurance premiums) and not for
other purposes, and HRAs cannot be funded on a salary reduction
basis. HRAs must have a maximum dollar amount for each coverage
period, and amounts remaining in an HRA at the end of the year
may be carried forward to be used to reimburse medical expenses
in following years.\12\
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\12\General guidance with respect to HRAs is provided in Notice
2002-45.
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An employee may exclude amounts provided through an HRA
from gross income. For employer payments or reimbursements
under an HRA to be excluded from gross income, expenses must be
substantiated and an employee must be entitled to receive
payments from the employer only if he or she incurs qualifying
expenses.\13\
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\13\Treas. Reg. sec. 1.105-2.
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After the enactment of the PPACA and before the
establishment of individual coverage HRAs (as described below),
an HRA generally failed to meet the group health plan
requirements imposed by the PPACA unless the HRA complied with
Internal Revenue Service (``IRS'') rules relating to HRAs
provided in conjunction with (or ``integrated'' with) certain
other employer-sponsored coverage that met the group health
plan requirements.\14\ An HRA that is integrated with such
employer-sponsored coverage is often referred to as an
``integrated'' HRA, and an HRA that is not integrated with such
employer-sponsored coverage is often referred to as a ``stand-
alone'' HRA. Thus, an employer could be subject to an excise
tax if it provided employees a stand-alone HRA covering medical
expenses, with the exception of certain limited benefits, for
example, coverage only for vision or dental medical
services.\15\
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\14\See, e.g., Notice 2013-54, 2013-40 I.R.B. 287, September 30,
2013. The 21st Century Cures Act created a limited exception to this
rule in the form qualified small employer health reimbursement
arrangements (QSEHRAs). Unlike traditional HRAs, QSEHRAs are designed
so that small employers may subsidize employees' purchase of individual
coverage on an Exchange. Pub. L. No. 114-255, sec. 18001, December 13,
2016.
\15\See Notice 2015-87, 2015-52 I.R.B. 889, December 28, 2015.
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Individual coverage HRAs
In August 2019, final rules were issued permitting
employers to contribute to HRAs used for the purpose of
purchasing individual health insurance coverage, without
violating the group health plan requirements (the ``final
rules'').\16\ The final rules provide that employers may offer
employees an ``individual coverage HRA,'' and, that if those
individuals use the amounts contributed to that HRA to purchase
health insurance coverage on the individual market, the group
health plan meets the relevant group health plan requirements.
An individual coverage HRA may also be used in conjunction with
coverage under Medicare Part A and B or C.\17\
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\16\T.D. 9867, 84 Fed. Reg. 28888, June 20, 2019.
\17\Treas. Reg. sec. 54.9802-4(e).
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Individual coverage HRAs are subject to detailed
regulations, including the following requirements: the terms of
the individual coverage HRA must require that employees,
spouses, and dependents enrolled in the HRA also be enrolled in
individual health insurance coverage;\18\ employers are not
permitted to allow employees to choose between an individual
coverage HRA and traditional employment-related health
coverage;\19\ employers are required to offer individual
coverage HRAs on the same terms to all employees within
enumerated classes of employees;\20\ generally, employers are
required to provide employees notice regarding the individual
coverage HRA at least 90 calendar days before the beginning of
the plan year;\21\ and employers are required to adopt
reasonable procedures for substantiation regarding individuals'
enrollment in qualifying individual coverage.\22\
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\18\Treas. Reg. sec. 54.9802-4(c)(1).
\19\Treas. Reg. sec. 54.9802-4(c)(2).
\20\Treas. Reg. sec. 54.9802-4(c)(3).
\21\Treas. Reg. sec. 54.9802-4(c)(6).
\22\Treas. Reg. sec. 54.9802-4(c)(5).
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Because individual coverage HRAs are employer-sponsored
group plans, individuals enrolled in individual coverage HRAs
are not eligible for PTCs. Furthermore, the final rules include
an affordability test, under which the value of the employer
contribution to the individual coverage HRA is compared to the
price of the lowest cost silver plan available to the employee.
Similar to the rule for traditional group health plans, if the
employee's share of the premium for self-only coverage under
that plan is more than 9.12 percent (for 2023) of the
employee's household income, the individual coverage HRA is not
considered affordable and the employee may be entitled to PTCs
for individual health coverage purchased on an Exchange.\23\
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\23\Treas. Reg. sec. 1.36B-2(c)(3). An individual coverage HRA that
is affordable is also treated as providing minimum value.
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In addition to amounts contributed to an individual
coverage HRA by the employer, employees may make contributions
through a cafeteria plan to purchase individual coverage, if,
for example, the employer's contribution to the individual
coverage HRA is less than the premium for the individual
coverage selected by the employee. However, amounts available
through a cafeteria plan may not be used to purchase individual
health coverage on an Exchange, so, in these circumstances,
employees must use the individual coverage HRA to purchase off-
Exchange coverage.\24\
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\24\Sec. 125(f)(3), providing that an employer generally may not
provide a qualified health plan offered through an Exchange as a
cafeteria plan benefit.
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REASONS FOR CHANGE
The Committee believes that individual coverage HRAs have
greatly enhanced the health coverage options available to
individuals, families, and employers. Individual coverage HRAs
have provided more choice and flexibility for working people,
and have saved employers, particularly small businesses, on the
administrative expenses and burdens associated with traditional
employer-sponsored health insurance. The Committee therefore
believes it is appropriate to codify the regulations permitting
the adoption of these arrangements, to ensure that families and
businesses may continue to benefit from them.
EXPLANATION OF PROVISION
The provision codifies the final rules permitting employers
to offer individual coverage HRAs--renamed as Custom Health
Option and Individual Care Expense, or ``CHOICE,''
arrangements--without violating the group health plan
requirements. Specifically, the provision specifies that a
CHOICE arrangement that otherwise satisfies the requirements
prescribed in the proposal complies with sections 2711 and 2713
of the PPACA.
The provision defines a CHOICE arrangement as an HRA under
which payments or reimbursements may only be made for medical
care during periods during which a covered individual is also
covered under individual health insurance coverage offered in
the individual market (other than coverage that consists solely
of excepted benefits) or under Medicare parts A and B or C. In
addition, a CHOICE arrangement must meet the following
requirements:
The CHOICE arrangement must be offered to
all employees in the same class of employees on the
same terms.
The employer may not offer any other group
health plan to any employees in such a class.
The CHOICE arrangement must have reasonable
procedures to substantiate that the covered individual
is, or will be, enrolled in qualifying individual
market coverage as of the beginning date of coverage
under the arrangement; and that the covered individual
remains so enrolled when requests are made for payment
or reimbursement of medical care.
A CHOICE arrangement generally must provide
each employee eligible to participate in the in the
CHOICE arrangement with written notice of the
employee's rights and obligations under the arrangement
not later than 90 days before the beginning of the plan
year. The notice must be sufficiently accurate and
comprehensive to appraise the employee of such rights
and obligations be written in a manner calculated to be
understood by the average employee eligible to
participate.
The provision includes the following classes of employees:
Full-time employees;
Part-time employees;
Salaried employees;
Non-salaried employees;
Employees whose primary site of employment
is in the same rating area;
Employees who are included in a collective
bargaining unit;
Employees who have not met a waiting period
requirement;
Seasonal employees;
Employees who are non-resident aliens and
who receive no earned income (within the meaning of
section 911(d)(2)) from the employer which constitutes
income from sources within the United States;\25\ and
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\25\Under the section 861(a)(3) rules for the source of income from
personal services.
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Such other classes as designated by the
Treasury.
Under the provision, an employer may designate two or more
of the classes as specified classes to which the arrangement is
offered, and distinctions regarding full-time, part-time, and
seasonal employees must be made under rules similar to those
that apply under sections 105(h) or 4980H, at the election of
the employer for the plan year. An arrangement does not fail to
qualify as a CHOICE arrangement if the maximum dollar amount
varies within a class because the amount increases with the
number of additional individuals covered under the arrangement,
or increases as the age of the employee increases (as long as
the increase is not in excess of 300 percent of the lowest
maximum dollar amount available). Finally, an employer that
currently offers a traditional group health plan to a class of
employees is permitted to prospectively offer newly-hired
employees in that class a CHOICE arrangement while continuing
to offer previously-hired employees a traditional health plan
without violating the rule prohibiting differing offers within
a class of employees.
The provision provides that, to the extent not inconsistent
with the provision, no inference is intended with respect to
the individual coverage HRA final rules. The provision also
specifies that all references in the provision to CHOICE
arrangements must be treated as including references to
individual coverage HRAs.
EFFECTIVE DATE
The provision is effective for plans years beginning after
December 31, 2023.
III. VOTE OF THE COMMITTEE
In Compliance with the Rules of the House of
Representatives, the following statement is made concerning the
vote of the Committee on Ways and Means during the markup
consideration of H.R. 3799, The ``Custom Health Option and
Individual Care Expense Arrangement Act'' on June 7, 2023.
H.R. 3799 was ordered favorably reported to the house of
representatives as amended by a roll call vote of 25 Yeas To 18
Nays (With A Quorum Being Present). The vote was as follows:
----------------------------------------------------------------------------------------------------------------
Representative Yea Nay Present Representative Yea Nay Present
----------------------------------------------------------------------------------------------------------------
Mr. Smith (MO)..................... X ...... ......... Mr. Neal............. ...... X .........
Mr. Buchanan....................... X ...... ......... Mr. Doggett.......... ...... X .........
Mr. Smith (NE)..................... X ...... ......... Mr. Thompson......... ...... X .........
Mr. Kelly.......................... X ...... ......... Mr. Larson........... ...... X .........
Mr. Schweikert..................... X ...... ......... Mr. Blumenauer....... ...... X .........
Mr. LaHood......................... X ...... ......... Mr. Pascrell......... ...... X .........
Dr. Wenstrup....................... X ...... ......... Mr. Davis............ ...... X .........
Mr. Arrington...................... X ...... ......... Ms. Sanchez.......... ...... X .........
Dr. Ferguson....................... X ...... ......... Mr. Higgins.......... ...... X .........
Mr. Estes.......................... X ...... ......... Ms. Sewell........... ...... X .........
Mr. Smucker........................ X ...... ......... Ms. DelBene.......... ...... X .........
Mr. Hern........................... X ...... ......... Ms. Chu.............. ...... X .........
Ms. Miller......................... X ...... ......... Ms. Moore............ ...... X .........
Dr. Murphy......................... X ...... ......... Mr. Kildee........... ...... X .........
Mr. Kustoff........................ X ...... ......... Mr. Beyer............ ...... X .........
Mr. Fitzpatrick.................... X ...... ......... Mr. Evans............ ...... X .........
Mr. Steube......................... X ...... ......... Mr. Schneider........ ...... X .........
Ms. Tenney......................... X ...... ......... Mr. Panetta.......... ...... X .........
Mrs. Fischbach..................... X ...... .........
Mr. Moore.......................... X ...... .........
Mrs. Steel......................... X ...... .........
Ms. Van Duyne...................... X ...... .........
Mr. Feenstra....................... X ...... .........
Ms. Malliotakis.................... X ...... .........
Mr. Carey.......................... X ...... .........
----------------------------------------------------------------------------------------------------------------
IV. BUDGET EFFECTS OF THE BILL
A. Committee Estimate of Budgetary Effects
In compliance with clause 3(d) of rule XIII of the Rules of
the House of Representatives, the following statement is made
concerning the effects on the budget of the bill, H.R. 3799, as
reported.
The bill is estimated to have no effect on Federal fiscal
year budget receipts for the period 2023-2033.
B. Statement Regarding New Budget Authority and Tax Expenditures Budget
Authority
In compliance with clause 3(c)(2) of rule XIII of the Rules
of the House of Representatives, the Committee states that the
bill involves no new or increased budget authority. The
Committee states further that the bill involves no new or
increased tax expenditures.
C. Cost Estimate Prepared by the Congressional Budget
Office
The Committee has requested but not received from the
Director of the Congressional Budget Office a statement as to
whether this bill contains any new budget authority, spending
authority, credit authority, or an increase or decrease in
revenues or tax expenditures.
V. OTHER MATTERS TO BE DISCUSSED UNDER THE RULES OF THE HOUSE
A. Committee Oversight Findings and Recommendations
With respect to clause 3(c)(1) of rule XIII of the Rules of
the House of Representatives, the Committee made findings and
recommendations that are reflected in this report.
A. Statement of General Performance Goals and Objectives
With respect to clause 3(c)(4) of rule XIII of the Rules of
the House of Representatives, the Committee advises that the
bill does not authorize funding, so no statement of general
performance goals and objectives is required.
B. Information Relating to Unfunded Mandates
This information is provided in accordance with section 423
of the Unfunded Mandates Reform Act of 1995 (Pub. L. No. 104-
4).
The Committee has determined that the bill does not contain
Federal mandates on the private sector. The Committee has
determined that the bill does not impose a Federal
intergovernmental mandate on State, local, or tribal
governments.
C. Congressional Earmarks, Limited Tax Benefits, and Limited Tariff
Benefits
With respect to clause 9 of rule XXI of the Rules of the
House of Representatives, the Committee has carefully reviewed
the provisions of the bill, and states that the provisions of
the bill do not contain any congressional earmarks, limited tax
benefits, or limited tariff benefits within the meaning of the
rule.
D. Tax Complexity Analysis
Pursuant to clause 3(h)(1) of rule XIII of the Rules of the
House of Representatives, the staff of the Joint Committee on
Taxation has determined that a complexity analysis is not
required under section 4022(b) of the IRS Reform Act because
the bill contains no provisions that amend the Internal Revenue
Code of 1986 and that have ``widespread applicability'' to
individuals or small businesses, within the meaning of the
rule.
E. Duplication of Federal Programs
In compliance with clause 3(c)(5) of rule XIII of the Rules
of the House of Representatives, the Committee states that no
provision of the bill establishes or reauthorizes: (1) a
program of the Federal Government known to be duplicative of
another Federal program; (2) a program included in any report
from the Government Accountability Office to Congress pursuant
to section 21 of Public Law 111-139; or (3) a program related
to a program identified in the most recent Catalog of Federal
Domestic Assistance, published pursuant to the Federal Program
Information Act (Pub. L. No. 95-220, as amended by Pub. L. No.
98-169).
VI. CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED
A. Changes in Existing Law Proposed by the Bill, as Reported
In compliance with clause 3(e) of rule XIII of the Rules of
the House of Representatives, changes in existing law made by
the bill, as reported, are shown as follows (existing law
proposed to be omitted is enclosed in black brackets, new
matter is printed in italics, and existing law in which no
change is proposed is shown in roman):
INTERNAL REVENUE CODE OF 1986
* * * * * * *
Subtitle K--Group Health Plan Requirements
* * * * * * *
CHAPTER 100--GROUP HEALTH PLAN REQUIREMENTS
* * * * * * *
Subchapter B--OTHER REQUIREMENTS
* * * * * * *
SEC. 9815. ADDITIONAL MARKET REFORMS.
(a) General rule.--Except as provided in subsection (b)--
(1) the provisions of part A of title XXVII of the
Public Health Service Act (as amended by the Patient
Protection and Affordable Care Act) shall apply to
group health plans, and health insurance issuers
providing health insurance coverage in connection with
group health plans, as if included in this subchapter;
and
(2) to the extent that any provision of this
subchapter conflicts with a provision of such part A
with respect to group health plans, or health insurance
issuers providing health insurance coverage in
connection with group health plans, the provisions of
such part A shall apply.
(b) [Exception.--] Exceptions._
(1) Self-insured group health plans.--Notwithstanding
subsection (a), the provisions of sections 2716 and
2718 of title XXVII of the Public Health Service Act
(as amended by the Patient Protection and Affordable
Care Act) shall not apply with respect to self-insured
group health plans, and the provisions of this
subchapter shall continue to apply to such plans as if
such sections of the Public Health Service Act (as so
amended) had not been enacted.
(2) Custom health option and individual care expense
arrangements.--
(A) In general.--For purposes of this
subchapter, a custom health option and
individual care expense arrangement shall be
treated as meeting the requirements of section
2711 and 2713 of title XXVII of the Public
Health Service Act.
(B) Custom health option and individual care
expense arrangements defined.--For purposes of
this section, the term ``custom health option
and individual care expense arrangement'' means
a health reimbursement arrangement--
(i) which is an employer-provided
group health plan funded solely by
employer contributions to provide
payments or reimbursements for medical
care subject to a maximum fixed dollar
amount for a period,
(ii) under which such payments or
reimbursements may only be made for
medical care provided during periods
during which the individual is
covered--
(I) under individual health
insurance coverage (other than
coverage that consists solely
of excepted benefits), or
(II) under part A and B of
title XVIII of the Social
Security Act or part C of such
title,
(iii) which meets the
nondiscrimination requirements of
subparagraph (C),
(iv) which meets the substantiation
requirements of subparagraph (D), and
(v) which meets the notice
requirements of subparagraph (E).
(C) Nondiscrimination.--
(i) In general.--An arrangement meets
the requirements of this subparagraph
if an employer offering such
arrangement to an employee within a
specified class of employee--
(I) offers such arrangement
to all employees within such
specified class on the same
terms, and
(II) does not offer any other
group health plan to any
employees within such specified
class.
(ii) Specified class of employee.--
For purposes of this subparagraph, any
of the following may be designated as a
specified class of employee:
(I) Full-time employees.
(II) Part-time employees.
(III) Salaried employees.
(IV) Non-salaried employees.
(V) Employees whose primary
site of employment is in the
same rating area.
(VI) Employees who are
included in a unit of employees
covered under a collective
bargaining agreement to which
the employer is subject
(determined under rules similar
to the rules of section
105(h)).
(VII) Employees who have not
met a group health plan, or
health insurance issuer
offering group health insurance
coverage, waiting period
requirement that satisfies the
of section 2708 of the Public
Health Service Act.
(VIII) Seasonal employees.
(IX) Employees who are
nonresident aliens and who
receive no earned income
(within the meaning of section
911(d)(2)) from the employer
which constitutes income from
sources within the United
States (within the meaning of
section 861(a)(3)).
(X) Such other classes of
employees as the Secretary may
designate.
An employer may designate (in such
manner as is prescribed by the
Secretary) two or more of the classes
described in the preceding subclauses
as the specified class of employees to
which the arrangement is offered for
purposes of applying this subparagraph.
(iii) Special rule for new hires.--An
employer may designate prospectively so
much of a specified class of employees
as are hired after a date set by the
employer. Such subclass of employees
shall be treated as the specified class
for purposes of applying clause (i).
(iv) Rules for determining type of
employee.--For purposes for clause
(ii), any determination of full-time,
part-time, or seasonal employment
status shall be made under rules
similar to the rules of section 105(h)
or 4980H, whichever the employer elects
for the plan year. Such election shall
apply with respect to all employees of
the employer for the plan year.
(v) Permitted variation.--For
purposes of clause (i)(I), an
arrangement shall not fail to be
treated as provided on the same terms
within a specified class merely because
the maximum dollar amount of payments
and reimbursements which may be made
under the terms of the arrangement for
the year with respect to each employee
within such class--
(I) increases as additional
dependents of the employee are
covered under the arrangement,
and
(II) increases with respect
to a participant as the age of
the participant increases, but
not in excess of an amount
equal to 300 percent the lowest
maximum dollar amount with
respect to such a participant
determined without regard to
age.
(D) Substantiation requirements.--An
arrangement meets the requirements of this
subparagraph if the arrangement has reasonable
procedures to substantiate--
(i) that the participant is, or will
be, enrolled in coverage described in
subparagraph (B)(ii) as of the
beginning of the plan year of the
arrangement (or as of the beginning of
coverage under the arrangement in the
case of an employee who first becomes
eligible to participate in the
arrangement after the date notice is
given with respect to the plan under
subparagraph (E) (determined without
regard to clause (iii) thereof), and
(ii) any requests made for payment or
reimbursement of medical care under the
arrangement and that the participant
remains so enrolled.
(E) Notice.--
(i) In general.--Except as provided
in clause (iii), an arrangement meets
the requirements of this subparagraph
if, under the arrangement, each
employee eligible to participate is,
not later than 90 days before the
beginning of the plan year, given
written notice of the employee's rights
and obligations under the arrangement
which--
(I) is sufficiently accurate
and comprehensive to appraise
the employee of such rights and
obligations, and
(II) is written in a manner
calculated to be understood by
the average employee eligible
to participate.
(ii) Notice requirements.--Such
notice shall include such information
as the Secretary may by regulation
prescribe.
(iii) Notice deadline for certain
employees.--In the case of an
employee--
(I) who first becomes
eligible to participate in the
arrangement after the date
notice is given with respect to
the plan under clause (i)
(determined without regard to
this clause), or
(II) whose employer is first
established fewer than 120 days
before the beginning of the
first plan year of the
arrangement,
the requirements of this subparagraph
shall be treated as met if the notice
required under clause (i) is provided
not later than the date the arrangement
may take effect with respect to such
employee.
* * * * * * *
VII. DISSENTING VIEWS
House of Representatives,
Committee on Ways and Means,
Washington, DC, June 7, 2023.
DISSENTING VIEWS ON CHOICE ARRANGEMENT ACT, H.R. 3799
H.R. 3799 (Rep. Hern, R-OK) codifies a Trump Administration
rule on Individual Coverage Health Reimbursement Arrangements,
(ICHRAs) and renames them as CHOICE Accounts. ICHRAs allow
employers to offer workers a fixed reimbursement for premiums
that workers can use on the individual insurance market to
purchase a health insurance product.
Employers can use ICHRAs to discriminate against certain
classes of workers. The legislation allows employers to offer
ICHRAs to only certain classes of workers, for example hourly
workers or older workers but not C-suite executives. Employers
might target groups of workers with higher health costs,
sending them to the individual market with a voucher.
ICHRAs could increase premiums and worsen risk in the
individual market. A Brookings analysis found that allowing
employers to offer ICHRAs alongside a traditional group health
insurance plan could increase marketplace premiums by 16
percent to 93 percent. To the extent employers find ways to
offload high-cost or high-risk workers onto the individual
market, the adverse selection would drive up premiums in the
individual market.
The bill could result in circumvention of Affordable Care
Act (ACA) protections on pre-existing conditions, lifetime and
annual limits, or preventive care. The legislation describes
individual market coverage but does not explicitly reference
the code in defining an individual health insurance plan that
requires the ACA market protections like pre-existing
conditions protections.
The mere offer of an ICHRA may leave employees worse off.
An employee who has an offer of an ``affordable'' HRA is
prevented from accessing premium tax credits in the
marketplace. This offer can be particularly problematic for
lower-wage workers that would otherwise be able to find more
affordable coverage in the Marketplace and could lead to higher
premiums and out-of-pocket costs than under ACA coverage for
the employee.
Mr. Doggett (D-TX) offered an amendment to prevent ICHRAs
from being used to discriminate against certain classes of
workers and ensure that insurance coverage purchased with ICHRA
funds complies with critical ACA protections by explicitly
defining the term individual health insurance coverage. The
amendment was defeated by Republicans.
Richard E. Neal,
Ranking Member.
Ranking Member Richard E. Neal, Opening Statement,
Committee on Ways and Means Markup of H.R.
3799,
Wednesday, June 7, 2023.
I have big concerns about this bill, starting with the fact
that 36 hours ago, it had never been mentioned in this
Committee. This bill would codify a Trump Administration rule
on Individual Coverage Health Reimbursement Accounts, or ICHRAS
(ICK-rahs), renaming them as CHOICE Accounts. And it certainly
allows employers to make choices. By codifying this rule,
employers would be allowed to discriminate against certain
classes of workers. I suppose we shouldn't be surprised--in the
13 years since Democrats stood up for the millions of Americans
with pre-existing conditions, Republicans have tried time and
time again to strike down the Affordable Care Act. The bill
before us today seems like yet another Republican attempt to
undermine the consumer protections the ACA provides.
Employers could offer lesser coverage through ICHRAs to
lower-income workers, hourly workers, or seasonal workers,
reserving better coverage for their C-suite executives.
Employers can also single out only the high-cost workers to get
Marketplace coverage, leaving a cheaper, healthier pool for the
employer's group coverage.
We've seen this playbook from the Republicans before, using
policies to make the Marketplace risk pool sicker, instead of
robust. Once again, putting wealth before health. Republicans
are so intent on serving Big Pharma and their wealthy donors
that they want to build a sicker, poorer, and more segmented
version of our country.
For many low wage workers, they may be better off with no
ICHRA and using the Marketplace premium tax credits
strengthened by Democrats last Congress for more generous and
affordable coverage. Unfortunately, even being offered an ICHRA
could cause employees to lose subsidized Marketplace coverage
under this arrangement, leaving workers and their families
worse off.
If we worked together, we could have mitigated these issues
and included important safeguards that protect employees from
discrimination and ensure they have the information to make the
best health care choices for their families. Sadly, Republicans
are doubling down on leaving America's workers and their
families behind.
Thank you, and I yield back.
[all]