At the state level, your lobbyists, Bryson Popham, and Joan Smith are working all the time to protect your interests and prevent unnecessary and intrusive legislation and regulation. The 90-day Maryland legislative session is in the home stretch. On the 69th day – Monday, March 19th– a significant deadline occurred. This is the “crossover date,” the date by which legislation that originates in one house must “cross over” to the other house, indicating the intention of the house of origin that the legislation be enacted. Bills that cross over after this date are automatically sent to the Rules Committee of the receiving house. It is there that most of them will die.
Consequently, the days approaching crossover are long and filled with Committee reports, floor debate and much rushing around by legislators and lobbyists who wish to see their bills pass. After crossover, the picture will be clearer on legislation that has a good chance of becoming law.
In 2016, Maryland enacted the Contraceptive Equity Act. This was legislation advocated by Planned Parenthood of Maryland. It included a new mandated benefit, which would have required insurers to treat male sterilization (vasectomies) as a preventive service, thus incurring no deductible or other cost-sharing provisions. This new mandate would become effective January 1, 2018.
No entity in the insurance industry opposed this bill, and after it was enacted carriers filed their 2018 health plans including this new benefit. Last year, during the 2017 legislative session, we were made aware that the new mandate might jeopardize the status of High Deductible Health Plans under federal law. More important, any such question would also jeopardize Health Savings Accounts associated with HDHPs.
Over the past several years, for obvious cost-control reasons, the market has moved substantially in the direction of high deductible health plans. Persons insured under HDHPs have also utilized health savings accounts to accumulate pre-tax monies to pay out-of-pocket expenses, such as deductibles and coinsurance. This special status of HSAs under the federal tax laws make it a particularly useful tool.
The problem identified last year was that including vasectomies as a preventive service had not been officially recognized by the Internal Revenue Service. Without the certainty of IRS approval, the tax status of HDHPs and HSAs in Maryland was unclear.
As a result, many insurance brokers, financial planners, CPAs, bankers and others could not in good faith recommend that clients contribute to HSAs with confidence that such contributions would be upheld by the IRS.
We sought a legislative solution near the end of the 2017 legislative session, with bills sponsored by Delegate Nic Kipke and Senator Ed Reilly, to address this problem. These bills were not enacted. Instead, Insurance Commissioner Al Redmer, at the request of legislative leadership, wrote to the IRS seeking clarification. By the beginning of the 2018 legislative session, no answer had been received from the IRS. Meanwhile, the JLC became one of the founding members of the HSA Preservation Coalition, which grew to include such diverse interests as insurers, CPAs, bankers and financial planners. This Coalition became the driving force for legislation in 2018 to address the problem.
Because most ACA plans in both the small group and individual market have January 1 effective dates, this law will apply for those plans beginning January 1, 2019.
So, is 2018 a lost year for HSA contributions? Fortunately, not. We have just received a “Notice of Transition Relief” from the IRS on this subject. While it confirms our fear that inclusion of vasectomies as a preventive service, without the application of a deductible, is not permissible in an HDHP, it also provides a period of time for states with laws like Maryland’s to change their laws. We are already far advanced in this process.
The legislative session in Maryland will adjourn on April 9th. Given the posture of House Bill 135 and Senate Bill 137, together with the very substantial support among legislators familiar with the issue (thanks to all of the Coalition and JLC members who communicated with legislators) we expect the legislation to become law very soon, although we are not able, at this point, to quantify how soon.
There is still work to be done. Brokers must prepare for 2019 health plan filings in the individual, small group and large group markets (large groups may be able to make the necessary changes sooner). Clients must be advised what has happened and what we have done to solve the problem. Advice must be given on HSA contributions in 2018.
So while it may be too early to celebrate, we hope to have additional good news soon, when this legislation becomes law.
Both SB 137 and HB 135 have continued to advance. We expect both bills to be enacted. Thanks again to all of you who participated in the HSA Preservation Coalition. It was a terrific example of different stakeholder groups – brokers, financial planners, CPAs, bankers and others – coming together to achieve a common goal. Special thanks also to JLC Co-Chair Jon Frank who has devoted many hours to this issue. We are happy that Jon will be recognized by MAHU as its Person of the Year. Congratulations Jon!
For both insurance producers and advisors (indeed, anyone who provides advice on this subject) the inclusion of the fiduciary liability provisions in broader legislation that covers all manner of consumer financial transactions was troublesome. Without reviewing in detail our industry’s resistance to the federal imposition of fiduciary liability by the Department of Labor, suffice it to say that we and others engaged in the provision of financial services to our clients would oppose a fiduciary liability standard applied by Maryland. We did oppose it. It has been removed from HB 1634, and we expect it to be removed from SB 1068. We should point out, however, that the Senate Bill still contains language requiring the Maryland Financial Consumer Protection Commission to “study” the subject. We will continue to keep a close eye on this.
Individual insurance problems continue – no surprise to JLC members. The legislature will apparently provide short-term relief to this market in the form of a reinsurance pool funded (for one year only) by replacing the federal health insurance tax with a flat 2.75% fee on all fully insured products. They can do so because the recent federal tax reform legislation will not charge that tax for this one-year period. Although strongly resisted by commercial carriers that do not participate in the individual market, the legislature is moving ahead with this “one-year fix.” Longer term, the idea is to submit a new waiver application to CMS that is expected to afford the state the ability to have a long-term funding source. There are still many moving pieces to this idea, but the legislature has been working closely with both the Hogan Administration and CMS on the outlines of these bills. There is also hope that a federal budget resolution, due later this month, will provide additional monies for this purpose.
Not that JLC members need to be reminded, but those who are in the individual market will know that producer compensation is going to be a future issue as well. Other states are looking closely at moving to a fee-based system, and we expect Maryland to do so as well. That’s an issue for the future.
This bill appears to be moving, and it has an amendment that the JLC has supported. As introduced, it addressed a tragic situation where a parent applied for life insurance on the child and then murdered the child. The bill would have required a covered person from the age of 15 up to sign the application. Unfortunately, a document signed by a minor has no legal effect, as we pointed out to the Committee. This provision was removed, and the bill is now moving.
Two years ago, the legislature passed SB 1007 which established a state-run savings plan for employees of small businesses. We had opposed similar legislation successfully in previous years, because it violated ERISA. We removed our opposition to this plan because it was greatly reduced in scale (IRAs only) and requires significant private sector involvement.
Throughout this process we have operated through another Coalition – the Retirement Planning Coalition. This has been a very effective group of entities not only from the financial services industry, but also including the Maryland Chamber of Commerce and the National Federation of Independent Business. We attend and monitor every meeting of this state Board, and we successfully sought an amendment to SB 1001 this year to ensure that the Board is not enlarging its scope of operations beyond the limitd scope set forth in SB 1007.
The JLC also follows legislation that may impact the business operations of our members and their clients. This is one such bill. It would prohibit a prospective employer from inquiring about the salary history and other information from a job applicant. Businesses large and small protested that information about an applicant’s prior position, including job titles, responsibilities and salary information is essential in making an informed decision whether to offer employment to an applicant. We are pleased to report and these bills have not moved since their hearings in their respective Houses.