The move is expected to expand health care options to 11 million workers by allowing employers to set aside tax-preferred funds so more classes of employees have more freedom in how to use their HRA’s. A number of employers don’t offer group health insurance because of cost or may offer only one plan.
“The Trump administration’s new HRA rule undoes an Obama administration action that forbade workers from using HRA funds to purchase health insurance policies offered outside their workplace,” Grace-Marie Turner, president of the Galen Institute, told Health Care News. “That change to the 2002 original rule reduced choices for workers and especially for small businesses. The new accounts have the potential to be transformative, much as 401(k)s were for retiree benefits, giving employees more control and portability with their health coverage.”
Employees can use the accounts to shop for their own health care arrangements, perhaps using them to pay for lower-cost direct primary care plans or supplement copays for a spouse’s full-ride insurance. Employees will also be able to shop for a greater choice of plans on the individual market.
“Too many Americans today have little say in how their health care is financed,” Health and Human Services Secretary Alex Azar stated. “President Trump has promised Americans that he will put them in control of their health care, and this expansion of HRAs will help deliver on that promise.”
Creates Additional Options
The new rule, which was issued by the departments of Health and Human Services (HHS), Labor, and Treasury, starts in January 2020. Employers will have to follow some new rules regarding the arrangements, such as having a procedure to substantiate employee participation in an outside plan and a process for opting out.
According to HHS, a significant number of employers stopped offering their workers health insurance coverage during the past decade because of cost concerns. In other cases, employers have limited their employees’ health insurance choices. According to HHS, 80 percent of employers offer only one health care plan.
The rule also allows for “excepted benefit HRAs,” in which employers can put aside up to $1,800 a year for employees who choose not to enroll in the company’s health insurance plan. Funds in either the excepted benefit HRA or a regular HRA can be rolled over year to year.
As the rule takes effect, it could have a significant positive effect on the nation’s health care market, says Turner.
“The HRA option is expected to eventually increase the size of the individual market, which has been decimated by Obamacare, by 50 percent,” said Turner. “It would help improve the market by drawing insurers back in to compete for millions of potential new customers. And the price transparency is expected to put downward pressure on costs.”
AnneMarie Schieber ([email protected])is managing editor of Health Care News.
Health Reimbursement Arrangements and Other Account-Based Group Health Plans, Federal Register, June 20, 2019: https://heartland.org/publications-resources/publications/health-reimbursement-arrangements-and-other-account-based-group-health-plans