October 24, 2018

Trump admin announced big changes for employer-sponsored care. Here's what you need to know.

Daily Briefing

    The Trump administration on Tuesday proposed a rule that would allow U.S. workers to use employer-funded health reimbursement arrangements (HRAs) to purchase private health coverage, The Hill reports.

    Cheat sheet: What you need to know about the ACA

    The Trump administration released the proposed rule under an executive order President Trump signed last year that directed federal agencies to consider changes that would loosen federal requirements on association health plans, short-term health plans, and employer-funded HRAs.

    About HRAs

    HRAs are employer-funded accounts that workers can use to pay for certain medical expenses. Federal rules implemented under former President Barack Obama's administration currently prohibit employees from using the accounts to purchase private health plans.

    The accounts are not subject to taxes if individuals who have the accounts also are enrolled in a health plan that meets the Affordable Care Act's (ACA) coverage standards. Large companies that offer health coverage to their employees currently are not permitted to also offer HRAs.

    Proposed rule details

    The proposed rule would lift restrictions that prevent large companies that offer health coverage from offering HRAs and workers from using HRAs to purchase private coverage. Specifically, the proposed rule would allow:

    • Workers at employers that do not offer health coverage to use up to $1,800 from their employer-funded HRAs to purchase private health plans that comply with the ACA's coverage standards; and
    • Workers at companies that offer health coverage to use up to $1,800 of the HRA to pay premiums for certain standalone benefits, such as dental benefits or short-term health plans.

    The proposed rule would require employers offering HRAs to allow workers to opt out and instead claim federal subsidies to help them purchase exchange coverage, Modern Healthcare reports.

    The proposed rule also would change the standards employers must meet to comply with the ACA's employer mandate. Currently, the ACA mandates that businesses with 50 or more workers offer health coverage to employees who work an average of at least 30 hours per week. But under the proposed rule, businesses could offer either health coverage or an employer-funded HRA to meet their obligations under the employer mandate, as long as the HRA an employer provides is deemed affordable. According to Modern Healthcare, the Trump administration will provide employers with additional guidance on how to determine whether an HRA is considered affordable.

    The Trump administration is accepting public comments on the proposed rule until Dec. 28. If finalized, the rule would take effect for plan years beginning on or after Jan. 1, 2020.

    Implications

    According to The Hill, Trump administration officials have said the proposed rule will increase competition in the insurance market, which ultimately will give employees more health plan options. The Department of the Treasury estimated the proposal could result in an estimated 10 million workers at 800,000 employers getting coverage using HRAs, including approximately one million workers who currently are uninsured.

    The officials said the proposed rule also would lower administrative burdens and costs for businesses, particularly among small- and mid-sized employers. According to Modern Healthcare, the officials projected that a majority of companies that take advantage of HRAs under the proposed rule will be those with fewer than 50 employees.

    But health advocates have expressed concerns that the proposed rule could cause some employers to stop offering coverage and instead steer employees with high health care costs into exchange plans, while directing their healthier employees into short-term health plans.

    Trump administration officials said the proposed rule includes guardrails to ensure that does not happen, Modern Healthcare reports. For instance, an official said employers that choose to offer HRAs would be required to offer it on the same terms for all employees of the same class, and employers could vary the premiums for HRAs based only on age and the number of dependents that would have access to the funds. According to MedPage Today, the types of employee classes could include full-time workers, part-time workers, seasonal workers, and others (Weixel, The Hill, 10/22; Baker, "Vitals," Axios, 10/23; Livingston, Modern Healthcare, 10/22; Lotven, Inside Health Policy, 10/22 [subscription required]; Diamond, "Pulse," Politico, 10/23; Firth, MedPage Today, 10/23; Department of Labor release, 10/23; Department of Labor fact sheet, 10/23).

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