The Trump administration is expanding options for employers to use special accounts to help workers buy their own health insurance, upgrade job-based coverage, or choose low-cost plans with limited benefits, officials said Thursday.
The tax-free individual accounts are called "health reimbursement arrangements," or HRAs, and starting next year employees will be able to use them to buy their own individual health insurance plans.
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Employers that offer regular workplace coverage can also set up another type of HRA account — limited to $1,800 a year — that will allow workers to get additional benefits such as dental and vision care. This second type of account can also be used to purchase lower-cost, short-term insurance that comes with limited benefits and doesn't have to cover pre-existing medical conditions.
HRAs are already available to employers and workers, but the administration finalized new rules that potentially could boost their popularity. Thursday's final regulation is nearly 500 pages long, and will take time for experts and benefit consultants to parse. But critics fear that some of the changes could undermine traditional workplace insurance, or raise premiums for individual plans.
The White House says the expansion of HRAs is aimed at small to midsized businesses that struggle with cost of health insurance premiums. The administration estimates that eventually 800,000 employers and more than 11 million workers and family members will benefit.
"This is going to create significant benefits for employers, particularly small employers, and millions of workers," White House health policy adviser Brian Blase told reporters.
The HRA accounts join short-term health insurance and association health plans as the Trump administration's answer to high health insurance premiums. The common thread in all three approaches is that they're geared to making private coverage more affordable. But they don't include the same levels of protections and benefits required by the Obama-era Affordable Care Act.
It's unclear how much impact Trump's combined policy changes will have. Association health plans are under a legal cloud after a federal judge struck down the regulation and the administration appealed. Solid estimates for enrollment in short-term insurance are not yet available.
Analyst Larry Levitt of the nonpartisan Kaiser Family Foundation said HRAs seem to offer a tempting opportunity for employers. Instead of struggling with premium increases year after year for a company-wide plan, they could put a fixed amount of money in employees' accounts and let their workers buy their own coverage.
"With this new approach there is a potential for employers to shift to a defined contribution for health care, much like they have done for pensions with 401(k) plans," he said. "But I don't think that will happen on a large scale." Employers would risk a backlash if their workers get rattled by a health care switch.
While any employer can set up HRAs, officials said they are designed with two types of companies in mind: small firms that are not required to offer health insurance and medium-sized firms that usually only offer their workers a single plan.
The Obama administration had disallowed using the tax-free accounts for workers to buy their own individual health insurance, and the Trump administration reversed that.
The money employers put in the accounts is tax-free to workers and tax-deductible for the company. Employees can't put their own money into the accounts. Trump administration officials said the changes will bring more consumers into the individual health insurance market. Some employees might do the math and figure they'd come out ahead taking the money in the account and buying their own policies.
Some critics say HRAs could allow employers to come up with strategies for shifting workers with high health care costs off their company plans and into the market for individual policies, although the administration says it has acted to head that off.
John Barkett, a regulatory expert with benefits consultant Willis Towers Watson said even if several million more customers sign up for individual health insurance plans, a large-scale exodus from employer-provided coverage seems unlikely.
"This is a brand new option for employers considering the best way to provide health insurance for their employees," he said. "We don't yet know if employees are going to value this option, or if employees are going to say, 'I'd rather my employer take care of (health insurance) and I don't want to shop for it myself.'"
The new accounts will start to become available next Jan. 1.