WASHINGTON D.C. – On Thursday President Donald Trump finalized a rule that will go into effect on January 1, 2020 that will allow American workers more options for health care coverage. The rule will allow employers pay for workers to use an HRA (Health Reimbursement Arrangement) to purchase health insurance coverage. It is the latest in a series of reforms President Trump has put forward to lower health insurance costs, provide more options, reduce prescription drug costs and protect people with pre-existing conditions.
Barack Obama, workers were forbidden to use an HRA to purchase health insurance
coverage, effectively freezing workers out from the individual health insurance
market and locking them into their employers’ group coverage.
But the Obama era restrictions have not worked out for many workers for several reasons, which the Trump administration says they will correct:
— Some small employers don’t want to deal with the hassle of a group health insurance plan, or can’t afford the cost. Those employers can now offer their workers tax advantaged money to purchase health insurance on the individual market.
— The “tax advantaged” part is important for other workers and employers too. The Trump administration’s rule allows for premiums on plans purchased from an HRA to be excluded from federal income and payroll taxes. If an employee prefers an HRA and can get an individual plan for less than the group policy, they won’t face a tax penalty.
— Workers will have more choices. According to Brian Blase at the National Economic Council, 80% of employers that offer health insurance only offer one plan. If a worker’s unique needs are not met by the plan offered by their employer, they have options to shop around.
— In the new, fast-paced American economy, workers change jobs much more often than the period of time when employer-based health coverage ascended. The availability of HRA’s will allow workers to maintain their health insurance coverage by putting control of their plan in their hands if they decide to change jobs.
California’s Attorney General Xavier Bacerra has joined Attorneys General from three other states threatening to sue the Trump administration over the rule. At the core of Bacerra’s argument is that the policy might lead to more American workers who are less healthy to shop the individual market for more affordable insurance, impacting premiums. That argument seems peculiar given that Bacerra is a Democrat who supports Obamacare, which mandated those same people to enter into the individual health insurance market if they did not have other coverage, but without the option for their employer to reimburse them for the cost.
The White House said in a statement that over the past decade, a significant number of employers that offered group health insurance plans dropped the coverage, largely due to the rising cost and complexity. They say this will provide those employers a less complex and expensive way to take care of their workers.
More than 800,000 employers with 11 million employees are expected to take advantage of the HRA option when employers fully adapt. It is projected nearly 1 million workers who have been uninsured will gain coverage.