President Donald Trump touted the administration’s expansion of health reimbursement arrangements (HRAs) during a speech at the White House on Friday, saying they “will be the way of the future.”
A federal rule that would allow employers greater leeway to offer HRAs—in which employees are offered a stipend to help cover the cost of insurance on the individual marketplace—was finalized Thursday evening. The administration expects small businesses will be the biggest benefactor of the rule, which will take effect in 2020.
Trump called it a “monumental victory for small business.”
“Small business optimism is soaring in our very booming and big economy,” Trump said, “and today we give you even more reason for your confidence in the future.”
Michael Kolber, a healthcare attorney and partner at Manatt Health, told FierceHealthcare that the administration’s projections of how many people will take advantage of the expanded HRAs in 2020—about 11 million people from 800,000 employers—underscores that the target for this policy is smaller employers.
However, allowing HRAs to enjoy the same tax benefits as traditional employer-sponsored health plans could draw interest from other types of employers as well, Kolber said.
“I think that really opens the doors for a lot of employers to think about doing this,” he said.
The rule was the last loose thread from Trump’s 2017 executive order that directed federal agencies to offer greater insurance choices to consumers. Under that order, the administration has also expanded the length of short-term health plans and allowed for greater use of association health plans.
“Many of these options are already reducing the cost of insurance premiums,” Trump said.
On a call with reporters Thursday, White House officials said expanding HRAs would also pay off for insurers, because it would lead to more people seeking coverage on the individual marketplaces. A higher individual market population could lure additional employers into the exchanges, officials said.
The rule also includes guardrails to protect against adverse selection, which would prevent employers from pushing employees with high-cost needs into the market.
Kolber threw cold water on the idea, though, noting that most of the insurers on the individual markets are the ones also offering employer plans, and costs are lower for them to negotiate group contracts compared to maintaining contracts with individual members.
Major insurers from CVS Health to United Health Group to Cigna expressed similar concerns in their comments on the proposed rule. Cigna, for example, warned that adding HRAs as an option could add more complexity for consumers who may already find the slate of options available to them confusing and hard to navigate.
On the flip side, though, Kolber noted that adding more people to the markets—within the rule’s guardrails—could stabilize them to some degree.
“In the long term it may be sort of an appropriate direction for the system,” Kolber said, “but I think people are perhaps underestimating the short-term effects.”