The administration of President Donald Trump wants to help employers of all sizes use health reimbursement arrangements (HRAs) to give employees cash the employees can use to buy their own individual major medical coverage.
The Trump administration also wants to help employers use HRAs to give employees cash they can use to pay their own short-term health insurance premiums.
Federal agencies have put rules that could make those kinds of arrangements possible in a new set of draft regulations — “Health Reimbursement Arrangements and Other Account-Based Group Health Plans.”
The HRA draft could implement a point Trump included in a health policy executive order he signed Oct. 12, 2017.
The Internal Revenue Service, the Employee Benefits Security Administration (EBSA), and the Centers for Medicare and Medicaid Services (CMS) worked together on the draft and are preparing to publish it in the Federal Register Oct. 29.
A preliminary version of the draft regulations is available here.
The administration released the draft shortly after they posted guidance describing changes in Affordable Care Act Section 1332 state waiver program rules. The Section 1332 rule changes could let states use limited-benefit health coverage arrangements, including short-term health insurance, in efforts to expand residents’ access to health coverage.
Officials estimate in the HRA regulation draft that HRA-based cash-for-coverage plans could help about 5 million people — or about 2.8% of all people with employer-sponsored health benefits — pay for their own individual coverage by 2022.
But the IRS, EBSA and CMS have proposed many restrictions on use of the new cash-for-coverage arrangements, in an effort to prevent health-based discrimination, and to keep adverse selection from destabilizing either the individual or small-group markets, and those restrictions could hold down use of the proposed arrangements.
For a look at seven points of interest in the draft regulations, read on.
1. The idea of using HRAs to fund cash-for-coverage arrangements has been around for years.
In the new draft regulations, Trump administration officials provide a summary of the recent legislative and regulatory history of the cash-for-coverage fight.
Many employers, insurers, agents, brokers and benefit plan administrators have been calling for the use of employer-sponsored “premium-only plan” health coverage purchase arrangements for years.
One reason has been a belief that the current U.S. employer-based health coverage system is an accident of history, and that both workers and the health insurance market would be better off if workers could pick their own coverage. Some have argued, for example, that workers would tend to choose cheaper, leaner plans than employers do, and that workers’ focus on holding down the premiums would force insurers and health care providers to do more to hold down costs.
Skeptics have argued that employers could use cash-for-coverage arrangements to push sicker employees into the individual market.
Under the administration of former President Barack Obama, federal agencies tried to keep employers from using HRAs to help workers pay for individual coverage.
(Related: Labor Rejects Cash-for-Coverage Strategies)
Some employers were using cash-for-coverage arrangements before Jan. 1, 2014, when the main Affordable Care Act group health plan requirements took effect. The National Federation of Independent Business found when it surveyed small employers in 2015 that 16% were still using cash-for-coverage arrangements that year, even though the Obama administration had tried to ban the arrangements.
Congress included a provision allowing small employers to reimburse employees for individual health premiums through Qualified Small Employer Health Reimbursement Arrangements (QSEHRAs) in the 21st Century Cures Act of 2016.