Originally published in The Montana Lawyer. 10th ed. Vol. 40. Helena, MT: State Bar of Montana, n.d. Print.
By, Andrew W. Baldwin, Kelly A. Rudd and M.J. Vuinovich
Congress exempted American Indians from payment of health insurance deductibles and co-payments under the Patient Protection and Affordable Care Act (ACA) (“Obamacare”) as a progressive way to help fulfill federal trust and treaty obligations in Indian Country.
However, recent IRS regulations prevent tribal members from obtaining this exemption if they work for a “large employer,” even when that employer is an Indian Tribe. The regulations push tribal members, who are exempt from the ACA individual mandate, away from the health insurance market and back toward the historically underfunded Indian Health Services (IHS) system.
At the same time, fewer insurance policies for tribal members reduce reimbursements for IHS, which, in turn, further reduce IHS funding and services. Indian Country is beginning to take a closer look at the problems created by these new IRS regulations and to lobby Congress and the Administration for a solution. In fact, Sen. Steve Daines, R-Mont., and others, are now sponsoring a bill to make it clear that Congress does not intend for Tribes to be treated as large employers under the ACA.
The Affordable Care Act
In 2010, Congress enacted special provisions for the health care of Indian people and permanently re-authorized the Indian Health Care Improvement Act (IHCIA) as part of the ACA. The intent of these provisions was to improve unconscionably poor health conditions among Native Americans and to help fulfill unique treaty and federal trust obligations to Tribes and tribal members.
Special Health Care Provisions for Indians
The ACA includes two important provisions that facilitate cost-effective health care for Native Americans: (1) ACA §1401, which provides Premium Tax Credits to low-income and working-class Americans [Fn 1] (people in the income range of 100-400 percent of the poverty line); [Fn 2] and (2) ACA §1402(d)(1), which provides for a Cost-Sharing Exemption that Congress created for the specific purpose of funding out-of-pocket insurance co-payments for Native American households with incomes that do not exceed 300 percent of the poverty line. [Fn 3]
The federal government has trust and treaty obligations to Native Americans and the need for improved health care services in Indian Country is extraordinary. As a result, Congress went to significant lengths to create legislation that dealt uniquely with the provision of health care for Native Americans under the ACA. Congress intended to treat Indian individuals, Tribes, and tribal entities separately and distinctly from non-Indians within the Act. [Fn 4] The act includes permanent re-authorization for the IHCIA. [Fn 5] It exempts Native Americans from the individual mandate on the basis of the trust relationship. [Fn 6] It creates special cost-share benefits for Native Americans. [Fn 7] It allows IHS to receive reimbursement for Part B Medicare services. [Fn 8] It adjusts the valuation of out-of-pocket costs for Part D Medicare provided through IHS. [Fn 9] It creates special monthly enrollment periods for Native Americans designed to promote and protect the rights of Native Americans to make choices about health care insurance. [Fn 10] It provides special grant funding opportunities to Tribes and tribal organizations. [Fn 11] The law gives special emphasis to promoting health among Native communities and involves Tribes in that process. [Fn 12] Further, it preserves a tax immunity for insurance or other health care assistance provided by Tribes for tribal members.[Fn 13]
Two Key Mandates of the ACA
Within the ACA, Congress created a new system for health care aimed at providing insurance coverage for most Americans. Generally, the law is structured around two key mandates which require most Americans to have health insurance: (1) the individual mandate; and (2) the Large Employer mandate. Nevertheless, Congress approached health care for Native Americans in a way that departs from this overarching structure and is not driven by the application of individual or Large Employer mandates.
The individual mandate obligates most people to purchase insurance or face tax penalties. [Fn 14] Congress made Native Americans exempt from the individual mandate. [Fn 15] This exemption is in recognition of treaty and trust obligations which require the federal government to provide health care to Native Americans, and builds on an established system of regulations and services provided through the IHS that pre-dates the ACA.
The large employer mandate [Fn 16] obligates certain employers with more than 50 employees to provide a qualified health insurance plan or face tax penalties. Indian Tribes are not specified in the statutory definition of a large employer that is subject to the mandate.[Fn 17] However, the IRS and U.S. Health and Human Services (HHS) now include Indian Tribes in a regulatory definition of “large employer.”
The IRS promulgated three final regulations – 26 C.F.R. §54.4980H-1, [Fn 18] 26 C.F.R. §301.6056-1, [Fn 19] and 26 C.F.R. §1.6055-1 [Fn 20] – that deem Indian governments to be “large employers” for purposes of the ACA. The IRS asserts that the Large Employer mandate applies to “government entities,” including “Indian tribal government employers” and promulgated regulations to that effect. See IRS Questions and Answers on Employer Shared Responsibility Provisions Under the Affordable Care Act. [Fn 21] One regulation includes tribal agencies and instrumentalities [Fn 22] and another regulation reserves the issue for another day. [Fn 23]
How Do New Regulations Block Benefits for Indians?
The ACA mandates that a Large Employer offer policies for their employees and their dependents on certain terms. Generally, the cost of such policies cannot exceed 9.5 percent of the employee’s household income. [Fn 24] A large employer that does not offer qualified policies faces fines and penalties for failing to do so. [Fn 25] Policies available through a Large Employer offer neither the §1401 Premium Tax Credits nor the §1402(d)(1) Cost Sharing Exemption for Indians. As a result, the new regulations block the benefits Congress intended for Native employees of large tribal employers.
The Obama Administration has begun to implement the regulations which include Indian Tribes in the definition of Large Employer. People who are employed by a Large Employer that offers qualified plans may choose to purchase insurance on the exchange instead of through their large employer, but in that event, those individuals are still not eligible for §1401 Premium Tax Credits to subsidize their health care costs. Moreover, under the new regulations, tribal members living below 300 percent of poverty will also be blocked from the §1402(d)(1) Cost Sharing Exemption if they are employed by a Large Employer.
In fashioning regulations expanding the large employer provision of the ACA to include Indian Tribes, the Obama Administration has, perhaps inadvertently, created barriers that block Native Americans from accessing important benefits that Congress provided. These regulations create a circumstance where a Native American who is employed by a Tribe (with over 50 employees) is only eligible for Large Employer group coverage. This Large Employer coverage does not provide either the Cost-Sharing Exemption or Premium Tax Credits. Simultaneously, the regulations disqualify the Native American employee from obtaining a policy on the exchange that would otherwise provide the Cost-Sharing Exemption and Premium Tax Credits, based (evidently) on the mistaken presumption that the Native American employee will have access to equivalent benefits and coverage on a Large Employer plan. Many tribal members cannot afford to purchase policies offered by a Large Employer, especially when doing so means they must also pay expensive deductibles and co-payments. Instead, members may decline to purchase health insurance and turn back toward reliance on the limited services provided by IHS. Tribes could face substantial financial penalties if they choose not to comply with the Large Employer mandate.
The regulations implementing the Large Employer mandate fail to recognize the unique status of Tribes and tribal members under the ACA. The agency regulations relegate tribal-member employees of tribal organizations to a generic category of Large Employers, erasing the distinction recognized by Congress.
Does King v. Burwell Impact Indian Country?
The recent Supreme Court ruling in King v. Burwell means that tribal members with health insurance in states that use the federal “exchange” can continue to obtain their policies there, which is good news. But the IRS and HHS continue to block tribal members who work for a Tribe with over 50 employees from the exemption from payment of deductibles and co-payments, which are available to other tribal members who do not work for a Large Employer.
Application of the Large Employer mandate to Tribes by regulation is contrary to the intent of Congress because it conflicts with treaty obligations and the federal system of health care incentives for Indians. It blocks Native Americans from the Cost-Sharing Exemption (and the Premium Tax Credit), exposes Tribes to penalties if they choose not to comply with the Large Employer mandate, increases financial pressure on efforts by Tribes to help provide affordable health care, reduces IHS budgets and services by eliminating insurance policies as third-party billing sources, increases insurance costs and reduces coverage for Indian people, and drives tribal members back toward reliance on the underfunded IHS system. Health care providers will be burdened by greater numbers of uninsured patients.
Consistent with its separate obligations to Indians and its special treatment of Indian health care issues, Congress intended Native Americans to obtain insurance policies and benefits available to them through the exchange. Coordinated lobbying efforts by Indian Country are needed to help resolve these problems.
Support for the bill sponsored by Sen. Daines is a great place to start.
This article is not intended and should not be relied upon to provide legal advice. The authors represent the Tribe in Northern Arapaho Tribe v. Burwell, a challenge to these IRS regulations. They can be contacted through Baldwin, Crocker & Rudd, P.C. (bcrattorneys.com), a firm emphasizing the practice of Indian law.
- ACA §1401 et seq., 26 U.S.C. 36B.
- ACA §1402(b)(2), 42 U.S.C. §18071.
- ACA §1402(d), 42 U.S.C. §18071.
- See Committee Report, Indian Health Care Improvement Act (IHCIA) (Congress expressly recognizes “the Federal Government’s long-standing obligations under lawful treaties with the Indian nations for the provision to them of health care services”); 25 U.S.C. §1602 (Indian health care laws spring from the United States’ “special trust responsibilities and legal obligations to Indians”).
- ACA §10221; 25 U.S.C. §1601 et seq.
- ACA §1501(b).
- ACA §1402(d).
- ACA §2902.
- ACA §3314.
- ACA §1311(D).
- ACA §2951, §3505(a).
- ACA §4001 et seq, §5101 et seq.
- ACA §9021.
- ACA §5000A, 26 U.S.C. §5000A
- ACA §5000A, 26 U.S.C. §5000A.
- ACA §1513, 26 U.S.C. §4980H
- 26 U.S.C.A. §4980H(c)(2)(A) as amended by §1513 of the Patient Protection and Affordable Care Act.
- On Feb. 12, 2014, the IRS promulgated regulation 26 C.F.R. §54.4980H-1 within its final regulations regarding “Shared Responsibility for Employers regarding Health Coverage.” The regulation includes Indian tribal governments, agencies or instrumentalities as a “Governmental entity.” The regulation took effect on January 1, 2015. See F.R. Vol. 79, No. 29, 8543 at 8544, 8577-80 (Feb. 12, 2014).
- On March 10, 2014, the IRS promulgated regulation 26 C.F.R. §301.6056-1 within its final regulations regarding “Information Reporting by Applicable Large Employers on Health Insurance Coverage Offered under Employer-Sponsored Plans.” This final regulation incorporates the definition from 26 C.F.R. §54.4980H-1(a)(4) and 26 U.S.C. §4980H(c)(2), which establish a Large Employer to be “… an employer who employed an average of at least 50 full-time employees on business days during the preceding calendar year.” The regulation includes Indian tribal governments and subdivisions as “Governmental units” subject to the Large Employer mandate. (The IRS has reserved for a later day its definition of agency or instrumentality.) This regulation also took effect on January 1, 2015. See F.R. Vol. 79, No. 46, 13231 at 13232, 13234, and 13247-48 (March 10, 2014).
- On March 10, 2014, the IRS promulgated regulation 26 C.F.R. §1.6055-1 within its final regulations regarding “Information Reporting of Minimal Essential Coverage.” These regulations set out guidance for providers of minimal essential coverage, including employers. It includes Indian tribal governments as a “government unit.” (The IRS has reserved for a later date the definition of agency or instrumentality of that unit.) This regulation also took effect on January 1, 2015. See F.R. Vol. 79, No. 46, 13220 at 13222 and 13226, 13227 (March 10, 2014).
- Available at IRS.gov Questions and Answers on Employer Shared Responsibility Provisions Under the Affordable Care Act.
- 26 C.F.R. §54.4980H-1(a)(23); Treas. Reg. §54.4980H-1.
- Department of Treasury, Information Reporting by Applicable Large Employers on Health Insurance Coverage Offered Under Employer-Sponsored Plans, F.R. Vol. 79, No. 46, 13231, 13234 (Preamble) (VII)(F) (March 10, 2014) (noting that “the regulations do not define the term agency or instrumentality of a governmental unit for the purpose of section 6056 …); see also 26 C.F.R. §301.6056-1, Treas. Reg. §301.6056-1(b)(7)-(8) (reserving on the definition of agency or instrumentality of a government unit).
- See ACA §5000A(e)(1)(B), 26 U.S.C. §36B(c)(2)(C)(i).
- ACA §1513, 26 U.S.C. §4980H.