A rule letting employers subsidize workers buying health plans on the individual market may have similar impact to the shift of retirement benefits to 401(k)s.
Senate Majority Leader Mitch McConnell speaks after a meeting with Senate Republicans in July 2017. Frustrated after attempts to repeal Obamacare fell apart in the Republican-controlled Senate, President Trump pledged to use executive power to remake healthcare markets. Twenty months ago, frustrated after attempts to repeal Obamacare fell apart in the Republican-controlled Senate, Trump pledged to use executive power to do what Congress failed to legislate.
The administrative actions are far short of repealing or replacing the Affordable Care Act, the law that expanded coverage to about 20 million people. Many of the ACA’s elements remain largely intact, including billions of dollars in subsidies, strict standards for insurance plan design, and rules that protect people with preexisting medical conditions.
The rule completed Thursday expands the use of health reimbursement arrangements, or HRAs, which let employers use tax-exempt funds to help workers pay for medical expenses, like a co-pay at a doctor’s office. In the past, HRAs could be used only in combination with group health plans sponsored by the employers. Starting in 2020, companies can use HRAs to subsidize workers buying entire health plans on the individual market, instead of offering them a company plan.
“It has the potential to transform employer-provided health insurance in a major way,” Levitt said in an email. If the projections are accurate, that would represent “a huge influx” of workers into the individual market governed by Obamacare rules.A broad shift to HRAs could resemble the movement in retirement benefits from defined benefit pensions to 401 plans, where employers make fixed contributions instead of promising a set benefit for years in the future.
The biggest impact so far comes from the rule expanding access to short-term health plans. While the plans are cheaper than Obamacare coverage, they cover less and can exclude people with preexisting conditions.
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