The Trump Administration has finalized a rule that would allow employers to fund individual, tax-preferred “HRA” accounts for employees to buy coverage on their own rather than cover them under traditional employer-sponsored health plans. This regulatory change could shift individuals from employer-based coverage, which insures more than half of all Americans under 65, to the state regulated individual markets, including Affordable Care Act (ACA) marketplaces. The proposal includes limits designed to deter employers from using Health Reimbursement Arrangements (HRAs) to steer sicker employees to the individual market, and the Administration argues that using HRAs to add people to the marketplaces will strengthen them. But the change could destabilize individual markets by leading to an influx of high-cost enrollees, and states regulators have few options to protect their markets.
It’s unclear whether many employers will see the new option as a credible alternative to traditional group health coverage. Yet in an economic downturn, fixed-dollar accounts could become attractive to employers looking to keep labor costs predictable. In a new post for the Commonwealth Fund’s To the Point, we look at the proposed changes and potential implications for employees and states. You can access the post here.