Tag Archive: HRAs

Trump administration adopts market-based statement of health care policy

Nearly nine months into his administration after many months of policy debate in Washington, President Donald Trump has issued an official statement of his administration’s health care policy in an October 12, 2017 Executive Order.

Trump’s policy is essentially not much different than that of his predecessor, Barack Obama, insofar as it retains one of the nation’s largest private sector financing mechanisms: employee benefit medical care plans. Like the managed competition principle of Obama’s Patient Protection and Affordable Care Act, Trump’s policy is market-based and aspires to harness competitive market forces to reduce medical costs and increase access to coverage.

It also mirrors the Affordable Care Act insurance market reforms by concentrating on the small employer group and individual (non-group) market segments where medical care cost pressures hit hardest. The order suggests (not orders) his administration explore allowing small employers to participate in association health plans traditionally used by large employer groups. In addition, Trump suggested his administration consider proposing regulations or revising guidance to increase the use of Health Reimbursement Accounts (HRAs) and expand employers’ ability to offer HRAs to their employees and allow HRAs to be used in conjunction with non-group coverage for employees.

The latter element closely aligns with recent legislation signed into law late in the Obama administration that enables employers to use a new type of HRA to subsidize premiums on a pre-tax basis for employees obtaining coverage in the non-group market. Effective January 1, 2017, employers of 49 or fewer employees that do not offer group coverage can fund up to $4,950 annually for single employees and $10,000 for an individual plan covering an employee and their family members.

Various observers expressed concern at the executive order’s suggestion (once again couched as a request, not a directive) that the administration consider reversing an Obama administration restriction limiting short term individual medical insurance policies to a maximum term of three months and expanding the limit to 12 months or even longer. The concern is well placed because doing so would put short term plans in competition with non-group and small group plans sold with the standard 12 month coverage term.

The Affordable Care Act established ten essential benefit categories with the goal to put small group and non-group coverage on a par with large group plans. But the tradeoff for these more generous plans is high and rapidly rising premium rates and deductibles, particularly painful for households earning too much to qualify for premium and cost sharing subsidies for individual plans sold on state health benefit exchanges. However, short term plans offering skimpier coverage for lower cost won’t comply with the Affordable Care Act’s minimum coverage mandate for individual taxpayers, subjecting them to a tax penalty.

Finally, Trump’s executive order reinforces market-based approach to mediate medical care costs by requiring the Health and Human Services Department in consultation with the departments of Treasury and Labor as well as the Federal Trade Commission to produce a report by April 12, 2018 and every two years following outlining where existing state and federal policy hinders market competition. The report must also identify policy actions to reduce barriers to market entry, limit excessive consolidation and prevent abuses of market power.

 


Need a speaker or webinar presenter on the Affordable Care Act and the outlook for health care reform? Contact Pilot Healthcare Strategies Principal Fred Pilot by email fpilot@pilothealthstrategies.com or call 530-295-1473. 

Feds draw bright line between employer group, individual coverage

The U.S. Departments of Labor, Health and Human Services and Treasury issued guidance that draws a bright line delineating employer group health coverage from individual coverage sold to those who aren’t covered by government or employer sponsored health plans.

Under the guidance issued November 6, employers cannot reimburse employees to cover individual policy premiums. “If the employer uses an arrangement that provides cash reimbursement for the purchase of an individual market policy, the employer’s payment arrangement is part of a plan, fund, or other arrangement established or maintained for the purpose of providing medical care to employees, without regard to whether the employer treats the money as pre-tax or post-tax to the employee,” the guidance states.

Nor may employers set up health reimbursement account (HRAs) that enable employees to purchase coverage and access advance premium tax credits for individual plans sold in the state health benefit exchange marketplace. HRAs are group health plans and therefore employees participating in them are ineligible for the credits or cost-sharing reductions, the departments reason. “The mere fact that the employer does not get involved with an employee’s individual selection or purchase of an individual health insurance policy does not prevent the arrangement from being a group health plan,” the guidance notes.

In addition, the guidance states employers may not offer cash to an employee in poor health in order to steer the employee away from a large employer’s group health plan. Such arrangements violate Health Insurance Portability and Accountability Act (HIPAA) provisions barring discrimination based on one or more health factors, the departments conclude. “Offering, only to employees with a high claims risk, a choice between enrollment in the standard group health plan or cash, constitutes such discrimination.”

 


Need a speaker or webinar presenter on the Affordable Care Act and the outlook for health care reform? Contact Pilot Healthcare Strategies Principal Fred Pilot by email fpilot@pilothealthstrategies.com or call 530-295-1473. 

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