The Trump Administration is proposing to loosen restrictions on health reimbursement arrangements, as part of its effort to introduce what it considers to be additional choice and competition into the healthcare system.
Health reimbursement arrangements (HRA) refer to a method through which companies contribute tax-free funds for employers to purchase their own insurance, instead of providing health plans themselves.
The Affordable Care Act prohibited the use of HRAs in the individual insurance exchanges due to its provision barring an annual dollar limit on group health benefits.
While an exception to this rule was made through the 21st Century Cures Act for small employers, many companies were still locked out of using HSA as a coverage option. Administration officials argue that these provisions have added undue barriers for employers and led to a decline in small businesses offering health coverage.
Essentially the policy being pitched by the Department of Health and Human Services, the Treasury Department and the Labor Department would open up the ability for workers to use HSAs to purchase insurance on the individual exchanges starting in 2020.
In order for the HRA to individual mandate health costs would need to be affordable for employees, which depends on the the amount of money contributed by employers.
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The proposed rule would also allow employers who offer traditional health plans to employees to reserve up to $1,800 in HRAs for additional benefits like vision or dental coverage.
“This proposal should dramatically increase choices for workers whose employers offer an HRA, and with more consumers in the driver’s seat, there will be increased incentive for insurers and providers to deliver high quality services at affordable prices,” one official said on a call with reporters.
Officials added that the proposed rule will have “carefully constructed guardrails” to prevent discrimination like employers pushing more expensive employees out of group coverage and into HSAs.
It will also require that employers give workers a choice to opt-out of HRAs in exchange for a federal premium tax credit which could also be used to purchase coverage.
The new proposed rule is part-and-parcel to the administration’s efforts to institute its own healthcare policy as outlined in the executive order released last year by the Trump Administration in the wake of the stalled legislative effort to repeal and replace the Affordable Care Act.
But whereas other policies promoted by the administration like the creation of short-term and association health plans would serve to weaken the ACA’s individual exchanges, this new rule would serve to bring people to the exchanges.
According to administration officials, by targeting companies traditionally too small to afford health coverage, HRAs could bring insurance coverage to 10 million employees across 800,000 different employers, with 1 million of those being newly insured workers.
“This is an additional option for employers to provide their workers past group insurance. Clearly there’s going to be reform needed, but this is an important step to inject increased choice and competition and address the problem of employers only offering one benefit option to employees,” one administration official said.
John Barkett, the senior director of policy affairs at Willis Towers Watson said that the new proposed policy is “hard to square” with previous administration actions on short-term and association health plans due to its reliance on the individual market.
If employers do decide to implement an HRA that integrates with individual markets he provided this piece of advice: “Study the rule and the individual market, and determine if that’s a good way to shop for coverage for you and your employees.”
Story updated with comments from John Barkett
Picture: Getty Images, Chip Somodevilla
