Notice of Proposed Rule Making
Department of the Treasury
Department of Labor
Department of Health and Human Services
Published in the Federal Register, October 29, 2018
Summary: This document sets forth proposed rules to expand opportunities for working men and women and their families to access affordable, quality healthcare through proposed changes to regulations under various provisions of the Public Health Service Act (PHS Act), the Employee Retirement Income Security Act (ERISA), and the Internal Revenue Code (Code) regarding health reimbursement arrangements (HRAs) and other account-based group health plans. (For simplicity, this preamble generally refers only to HRAs, but references to HRAs should also be considered to include other account-based group health plans, unless indicated otherwise.) Specifically, these proposed rules allow integrating HRAs with individual health insurance coverage, if certain conditions are met. The proposed rules also set forth conditions under which certain HRAs would be recognized as limited excepted benefits. Also, the Department of the Treasury (Treasury Department) and the Internal Revenue Service (IRS) propose rules regarding premium tax credit (PTC) eligibility for individuals offered coverage under an HRA integrated with individual health insurance coverage. In addition, the Department of Labor (DOL) proposes a clarification to provide plan sponsors with assurance that the individual health insurance coverage the premiums of which are reimbursed by an HRA or a qualified small employer health reimbursement arrangement (QSEHRA) does not become part of an ERISA plan, provided certain conditions are met. Finally, the Department of Health and Human Services (HHS) proposes rules that would provide a special enrollment period in the individual market for individuals who gain access to an HRA integrated with individual health insurance coverage or who are provided a QSEHRA. The goal of these proposed rules is to expand the flexibility and use of HRAs to provide more Americans with additional options to obtain quality, affordable healthcare. The proposed rules would affect employees and their family members; employers, employee organizations, and other plan sponsors; group health plans; health insurance issuers; and purchasers of individual health insurance coverage.
Administration Moves To Incentivize Health Reimbursement Arrangements
By Katie Keith
Health Affairs Blog, October 26, 2018
On October 23, 2018, the Departments of Health and Human Services, Labor, and Treasury issued a new proposed rule to expand the use of health reimbursement arrangements to fund access to health insurance and health care. The proposed rule was developed in response to President Trump’s executive order from October 2017 that directed the federal government to expand access to short-term, limited-duration insurance, association health plans, and health reimbursement arrangements (HRAs).
In the executive order, President Trump directed the Departments to “increase the usability of HRAs, to expand employers’ ability to offer HRAs to their employees, and to allow HRAs to be used in conjunction with nongroup coverage.” As expected by many health policy watchers, the new rule would reverse prior Departmental guidance by allowing HRAs to be used to fund both premiums and out-of-pocket costs associated with individual health insurance coverage.
The proposed rule would also create a new “excepted benefit HRA” option that employees could use to pay premiums for excepted benefits policies and short-term, limited-duration insurance policies.
From the Implications
The rule could lead the loss of coverage if employers stop offering group health plans in lieu of an HRA, and their employees do not accept the HRA or obtain other coverage. The rule could also affect individuals who currently qualify for and receive marketplace subsidies while working for an employer who does not offer health coverage. Under the proposed rule, the offer of an “affordable” HRA-IIHIC would make an employee ineligible to receive a premium tax credit. As a result, some employees could pay more for coverage under the HRA-IIHIC option than they were paying if they received a premium tax credit through the marketplace. Consumers may also face higher cost-sharing in the individual market relative to what they received through a group health plan, and the HRA-IIHIC option could impose higher administrative and compliance burdens on consumers who must navigate a seemingly new system.
Whether these changes would be good for the individual market risk pool remains to be seen and would depend largely on the risk profile of employees offered the new HRA-IIHIC option. The Departments repeatedly note the concern that expanding access to HRAs could lead to employers offering coverage options to employees in a way that discriminates based on health status. At one point, the Departments state their goal to “prevent large-scale destabilization of the individual market” through the proposed rule.
On the other hand, there is the possibility that employees who enter the individual market through an HRA-IIHIC would be healthier on average, which could lead to a better risk profile for the individual market, and thus lower premiums and an even more stable marketplace. This could be especially true if sicker employees hold on to their group health plans, which might be more comprehensive than individual market coverage.
Overall, the proposed rule comes at a seemingly odd time. In the preamble, the Departments describe the various market reforms and structure of the ACA as “intend[ed] to create a robust and competitive individual market, in part by ensuring that risk pools included both higher risk and lower risk individuals.” Given this, the Departments seem comfortable with incentivizing—or at least opening up the possibility for—employees to receive coverage through the individual market, thereby further expanding that market. They do so even as President Trump and senior political leaders continue to argue, as recently as yesterday, that the ACA and the individual market are deeply flawed and broken with “deteriorating market conditions.”
By Don McCanne, M.D.
The Trump administration is now proposing expanding the use of health reimbursement arrangements (HRAs) with the intent of moving more individuals from employer-sponsored plans and into the individual market, fulfilling the administration’s ideological preference for competition in the private marketplace.
If you are really curious about the details of their proposal, you can read the couple hundred pages of the proposed rule, or the long article by Katie Keith, briefly excerpted above. But understanding this proposal is not the purpose of today’s message. Rather it is to get a glimpse of the bizarre machinations in health care by this administrations.
Without going into any of the boring details, they are greatly increasing the administrative complexity of health care financing through health reimbursement arrangements, employer-sponsored plans, and plans in the individual market – this by an administration that says that it wants to increase choice and competition, giving more freedom to individuals to exercise their choices in the marketplace.
Administrative complexity is one of the worst features of health care financing in the United States, and yet this administration continues to compound the problem, not only increasing the waste, but further disrupting the important insurance function of pooling risk as they continue to increase fragmentation in health care financing.
Right now they are celebrating CMS Administrator Verma Seema’s tweet: “this year’s scariest Halloween costume – a tee shirt emblazoned with ‘Medicare for All.'” She followed up with, “Did I get your attention? Good. Medicare for All isn’t a joke. It’s a multi-trillion dollar drain on the American economy that will bankrupt future generations. It’s government controlled health care that will strip choice away from millions. It’s a bad idea. And it IS scary.”
Seema Verma has the solution to our health care financing problems right in front of her in her own department, and she ridicules it. What’s really scary is leaving these people in charge.
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