By Harris Meyer
Modern Healthcare, June 13, 2019
Employers will be able to hand their workers a chunk of tax-sheltered health reimbursement money and send them off to buy an individual health plan under a controversial rule issued by the Trump administration Thursday.
The final rule, which takes effect Jan. 1, 2020, will prompt an estimated 800,000 large and small employers to fund individual coverage through health reimbursement accounts (HRAs) for about 10 million workers, nearly 800,000 of whom would be newly insured.
Reversing prior policy, the 497-page rule lets employers dole out HRA funds—previously used to reimburse out-of-pocket medical expenses—to employees to buy individual-market plans.
While the HRA money can be used mostly for buying plans that meet Affordable Care Act requirements, employers under the rule can establish a special type of “excepted benefit” HRA for employees to use in buying cheaper short-term plans that don’t comply with ACA rules such as pre-existing condition protections. These special accounts are capped at $1,800 a year.
The ACA requires that companies with more than 50 full-time workers provide their employees with health insurance. Employers can satisfy the requirement if they provide adequate HRA contributions to employees to buy individual coverage.
A wide range of groups expressed fears about negative effects on the individual market if employers offloaded their sicker, more costly workers from their employer group plans to the individual market.
“If the administration’s estimates are right, this would result in a huge influx into the ACA-regulated individual insurance market,” said Larry Levitt, senior vice president for health reform at the Kaiser Family Foundation. “But these new accounts could shift employer-provided health insurance to a defined-contribution approach, leaving workers at greater risk for premium increases over time.”
In the final rule issued Thursday, the agencies decided that an “individual coverage” HRA can only be used to buy ACA-compliant plans. But this type of HRA will only be available to workers who are not offered a traditional group plan, according to Matthew Fiedler, an economist at the Brookings Institution’s Center for Health Policy.
Employers that provide a traditional group plan can offer workers an “excepted benefit” HRA, capped at $1,800 a year, that they can use to buy a short-term plan but not an ACA-compliant plan.
The final rule retained the proposed rule’s provision that employers cannot offer the same class of employees the choice of either a traditional group plan or an HRA-funded individual-market plan.
But the agencies declined to include specific enforcement guidance to determine whether employers are targeting individual coverage HRAs to high-cost employees.
The agencies also acknowledged the likelihood that employees will find the new HRA benefit system confusing, and that they may not understand the coverage limitations of short-term plans.
Contrary to the agencies’ finding that the rule would have a net beneficial effect, Brookings’ Fiedler argued that it will increase individual-market premiums and federal premium subsidy costs by encouraging larger employers with sicker workforces to shift their workers into the individual market.
He was particularly critical of the provision allowing use of excepted benefit HRAs, which are tax-sheltered, to buy short-term plans.
“At best, it’s a poor use of federal funds,” he said. “At worst, it will give firms a tool to shift costs from their healthier workers onto their sicker ones.”
Final rule (497 pages): Health Reimbursement Arrangements and Other Account-Based Group Health Plans
Trump’s new rule will give businesses and workers better health care options
By Brian Blase (special assistant to the president at the National Economic Council focused on health care policy)
CNN Business, June 14, 2019
While some recklessly claim that the administration has been sabotaging the individual market, this rule makes clear we have been focused on expanding affordable options through choice and competition in all possible venues. We aim to deliver better results than previous policies centered on mandates and a “Washington-knows-best” mentality. Obamacare’s many mandates still keep individual market premiums too high in many parts of the country, but this rule may spur necessary deregulatory reforms as more stakeholders now stand to benefit from a more competitive and free individual market.
By Don McCanne, M.D.
The Trump administration is once again using the fiction that deregulation and choice and competition in health plans “will give businesses and workers better health care options.” What they are enforcing through the rule-making process is further fragmentation of risk pools, greater administrative complexity and confusion, greater transfer of employees into the deficient individual insurance market (or out of the market altogether), greater use of cruelly inadequate short-term insurance plans, and use of health reimbursement arrangements (HRAs) as a tool to switch employees from guaranteed defined benefit health plans to health plans with ever-diminishing defined contributions, shifting yet more health care costs to the already overburdened employees and their families.
As Matthew Fiedler of Brookings states, “At best, it’s a poor use of federal funds; at worst, it will give firms a tool to shift costs from their healthier workers onto their sicker ones.”
The good news is, once we have enacted and implemented a single payer Medicare for All program, this 496 page rule can be dumped into the electronic trash bin along with billions of other pages from the private insurers and from the administrative-procedures electronic files of the health care professionals and institutions, finally allowing us to use our resources for the benefit of patients in an affordable and equitable health care financing system that benefits all.
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