Applaud IRS Ruling On HRAs For The New Options It Will Create
Health care costs are skyrocketing, physicians continue to rebel against health maintenance organizations, Congress remains poised to impose new mandates on health plans and employers are shifting more and more costs to their employees.
Are health reimbursement arrangements (HRAs) the harbinger of a revolution in the nations troubled health care system?
Advocates of these consumer-directed health plans believe so, particularly in light of the recent Internal Revenue Service interpretation that unspent amounts in HRAs can be carried over and used to pay for health care costs in future years.
In other words, the “use-it-or-lose-it” rule that applies to flexible spending accounts does not apply to employer-funded HRAs.
The belief among advocates of HRAs is that by giving individuals a direct stake in how their health care dollars are spent, they will become better consumers of health care.
As such, individuals will be more likely to comparison shop, demand generic alternatives to expensive brand-name medications and more closely examine their doctor and hospital bills.
This, HRA advocates say, will bring some much needed marketplace discipline into a health care system in which the actual consumers of health have, for too long, been essentially powerless.
“These new rules will promote personal ownership and health care savings in a way that will fundamentally change health care in America,” says Rep. Jim DeMint, R-S.C., an advocate of consumer-directed health plans.
Whether the implications of the IRS ruling are as sweeping as the HRA advocates suggest remains to be seen.
It is certainly not unusual in the complex world of health care reform for the hopes to far exceed the reality.
Nonetheless, the IRS ruling should be applauded. It will provide new options for employers as they try to cope with double-digit increases in health insurance premiums and continued dissatisfaction in many quarters with HMOs.
For all its flaws, the employment-based health care system has served the country well.
It has made high quality health care available to all employees of a covered employer regardless of salary or health status.
Without the employment-based system, consumers might well be saddled with a government-run system and the bureaucratic nightmare that it entails.
But employers are, understandably, becoming increasingly weary of the growing burdens of the system. Not only are costs skyrocketing, but Congress continually threatens to hold employers liable for medical decisions as part of the Patients Bill of Rights legislation.
Many employer groups say that if these burdens get much worse, the incentive will be to dump health insurance as an employee benefit and let individuals fend for themselves.
Perhaps HRAs will not revolutionize the health care delivery system in the United States.
But if they offer employers a practical new way to continue to provide health coverage to employees while controlling costs, if they thus help preserve the employment-based system, the impact of the IRS ruling will be significant nonetheless.
Reproduced from National Underwriter Life & Health/Financial Services Edition, July 8, 2002. Copyright 2002 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.