by Chris Byrd
The Trump administration proposed a new regulation this morning that would expand the use of health reimbursement arrangements (HRAs), giving employers of all sizes additional flexibility to provide greater choice to their employees. The proposed regulations issued by the Departments of Labor, Health and Human Services, and Treasury, allow employers to offer HRAs for reimbursement of individual health insurance premiums. In addition, employers who offer group health insurance would be able to offer HRAs of up to $1,800 (indexed for inflation) to reimburse certain excepted benefits, such as standalone dental benefits and premiums for a short-term health insurance plan.
HRAs are employer-funded plans that reimburse employees for medical expenses not covered by company-sponsored insurance, but the Obama administration had forbidden the use of them to pay for premiums on the individual market.
Building on President Trump’s executive order from October 2017, which called for expanded availability and permitted use of HRAs, the newly proposed rule would seek to “expand opportunities for working men and women and their families to access affordable, quality healthcare” through changes to regulations under various provisions of the Public Health Service Act, the Employee Retirement Income Security Act and the Internal Revenue Code.
The proposed regulations will be open for comment for 60 days from the date of publication. The proposed effective date is for plans beginning on or after Jan. 1, 2020.
At a high level, the proposed regulations build on the Qualified Small Employer HRAs (QSEHRAs) that were created by the 20th Century Cures Act in 2016. QSEHRAs allow small employers (1-49 employees) to offer HRAs to reimburse individual insurance premiums and/or out-of-pocket healthcare expenses. The proposed regulations expand the use of HRAs for premiums to all employers, regardless of size.
Whether this will lead mid-sized and large employers to get out of the business of offering group health insurance remains to be seen and will depend in large part on such factors as relative costs in the individual and group markets (current big advantage to group health) and tax advantages associated with the employee-paid portion of group health premiums.
Another possible trend would be for employers to offer the HRA as an option on a menu alongside group health, so that the employee has a wider choice of insurance plans and, for lower-income workers, access to subsidies on the public exchanges.
The excepted-benefit HRA represents a new product that provides employers with another way to provide benefits beyond traditional health insurance. Keep in mind that, to offer this HRA, the employer must also offer group health insurance.
One thing is certain: The proposed regulations open up new product opportunities for administrators to provide to employers, and they would benefit those employers by enabling them to offer a wider choice of benefit options to their employees. This is consistent with other recent moves by the current administration, such as the expansion of short-term health insurance plans.
WEX Health will be studying the regulations carefully, commenting on them to regulators, working with our colleagues in the industry and making any platform changes required to accommodate these new and expanded products.