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Final HRA Rule Could Shake Up Health Care Market

Organizations will soon be faced with a choice when it comes to their health-care plans. The Trump administration finalized rules late last week that will allow companies to reimburse employees who purchase health insurance in the Patient Protection and Affordable Care Act’s (ACA) individual market through health reimbursement arrangements (HRAs). 

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The rules, which go into effect Jan. 1, 2020, loosened Obama-era restrictions on short-term health plans that don’t meet the ACA’s standards. They are part of a push by the Trump administration to expand Americans’ choice of health care, as outlined in a 2017 executive order.

The administrative actions fell short of repealing or replacing the ACA, which was the Trump administration’s original intent. Many of the ACA’s elements remain intact, including rules that protect people with preexisting medical conditions.

John Barkett, director of policy affairs at Willis Towers Watson, worked in the Obama administration and helped write the ACA. Barkett said this rule will present employers with an interesting decision that wasn’t available before the ACA.

“Pre-ACA, employers could have offered this model to their workforce. Most did not, because they couldn’t guarantee everyone they employed would be able to find health insurance,” Barkett said. “Insurance companies in the individual market could turn their employees down for having preexisting conditions. So, even though it was possible, most employers didn’t use this model if they wanted to offer benefits to everyone in their workforce.”  

The Trump administration projects that 800,000 employers, most with fewer than 20 workers, will eventually offer HRAs to help 11 million workers purchase individual insurance coverage by 2029.

“Employers could look out at individual plans and find that they are pretty attractive,” Barkett said. “They could look at this model and decide they like having employees choose their own plan and keep it when they leave the company or keep the plans they have when they join their company — that’s called portability. If that’s the case, then you could see those estimates from the administration being on the low side.”

Some experts are speculating that a shift to HRAs could resemble the movement in retirement benefits from defined benefit pensions to 401(k) plans, where employers make fixed contributions instead of promising a set benefit for years in the future. Adopting the HRA model would provide businesses with more predictable costs while shifting the risk of higher health-care expenses onto workers.

“The big question is, are employees going to be happier, more attracted to work at a company if their employer offers health insurance and takes care of it, or if their employer says we will pay for your health insurance, you go pick whatever you want,” Barkett said. “Which one of those wins out is going to depend on the underlying individual marketplace, which has had its ups and downs over the last six years.” 

About the Author

Brett Christie is a staff writer at WorldatWork.


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