Not to be lost within a sprawling Republican-backed budget bill are new flexibilities designed to increase usage of heath savings accounts (HSAs), individual coverage health reimbursement arrangements (ICHRAs) and direct primary care (DPC) arrangements.
These changes, wrapped inside a one-sided reconciliation bill, are much less controversial than other provisions to reduce Medicaid spending, drive down enrollment in the Affordable Care Act (ACA) exchanges and impose a long-term moratorium on artificial intelligence regulations.
Still, these provisions are moving under the radar, despite overwhelming support from ICHRA insurers and administrators as well as employee benefit groups.
“We have a tiny sliver that really matters to employers and working families,” said James Gelfand, president and CEO of The ERISA Industry Committee, a group representing large employers. “But I can say those provisions are monumental to us.”
There’s a laundry list of items Gelfand and others are happy the bill, in its current form, includes.
Employer-offered worksite clinics with free or discounted primary care services would now be available to employees on high-deductible health plans (HDHPs), even if they already have an HSA.
“We think this is a real positive because it helps bring more affordable preventative primary care to plan members, without putting at risk the HSA tax benefits,” said Patrick Nelli, CEO and founder of Aligned Marketplace, a company offering self-insured employers a value-based advanced primary care network.
The bill encourages the proliferation of DPC arrangements, a model where patients or an employer directly pays a physician for primary care services, similar to an accountable care organization, said Gelfand. Under current law, DPCs are considered a health plan, and individuals cannot have a DPC and an HSA.
DPCs would no longer be classified that way in the legislation before the House. Instead, it is characterized as a supplementary product that allows individuals to spend HSA dollars on DPCs, helping alleviate an ongoing primary care provider shortage, said Nelli.
Other changes allow HSA funds to be spent on gym memberships, increases the HSA contribution limit for some individuals, classifies bronze and catastrophic plans as a HDHP that can pair with an HSA and permits one spouse to contribute to an HSA even if the other spouse has a flexible spending account.
Some proposals were introduced as far back as 2006 and even passed the House during President Donald Trump’s first term under the Bipartisan HSA Improvement Act. But this marks the first concerted approach in years from Congress to improve HDHPs, which tens of millions of Americans have.
“We’re calling it a once-in-a-generation opportunity,” praised Gelfand.
ICHRAs now CHOICEs?
The Trump budget bill also rebrands ICHRAs, as Custom Health Option and Individual Care Expense (CHOICE) arrangements. The previous name was an “awkward” acronym, said Jack Hooper, CEO of Take Command, an ICHRA provider and vendor, though not everyone agrees.
“We’ve spent five years teaching people what ICHRA [is],” said Ben Light, vice president of partnerships for Zorro, another ICHRA vendor.
More importantly, those in the field expect the changes to ICHRAs will likely add legitimacy and grow enrollment.
The bill codifies a rule from 2019 creating the program and lets employees use pretax dollars through a cafeteria plan to pay for on-exchange marketplace premiums, explains the KFF.
“By fixing that, you have basically said, ‘I’m now going to make the on-exchange and off-exchange plans equal in how they’re treated from a tax standpoint for that employee,’” said Light.
Providers would be worried this “fix” is harmful to their bottom line because it’s unclear how reimbursement levels would be impacted. Hospitals and payers agree to different rates depending on the type of insurance.
“That begs the question: How are we going to identify a person that is a CHOICE exchange product member versus an individual buying insurance on the marketplace?” wondered Becky Greenfield, a partner at boutique managed care revenue cycle firm Wolfe Pincavage.
Small employers are looking for ways to better manage rising healthcare costs, especially as satisfaction with traditional carriers continues to drop, said Dan Mendelson, CEO of Morgan Health under the JPMorgan Chase parent company.
“I see the next four years as being a very important time of growth for the ICHRA products,” he predicted. Morgan Health has invested in ICHRA administrator Venteur.
ICHRA plans are predominantly used by small- and midsized businesses to compensate workers, empowering them to seek insurance on the ACA exchanges. So far, the overall ICHRA market is small, and broader adoption has been slow.
Nearly half of employers and more than one-quarter of benefits consultants are not aware of ICHRA plan options, a recent survey conducted by ICHRA benefits firm zizzl health and insurance insights firm Deft Research found before the drafted budget bill was released.
Almost 9 in 10 employers currently offering ICHRAs intend to continue offering the plans for at least three more years, though employers are concerned about limited networks, coordinating payments between insurance carriers and opting out of the status quo.
Beginning in January, the bill would give small employers a $100 per-month per-member tax credit to offer ICHRA plans. The credit drops to $50 in subsequent years. The tax credit could boost the ICHRA plan space.
“Before CHOICE, I was hearing from both sides ‘we don’t really think there’s going to be a huge push for ICHRA,’” said Greenfield. “Now, this tax credit for small businesses under 50 people, that’s a pretty big incentive for small employers to adopt ICHRA and get off traditional group insurance.”
“The reality is, when your employer buys your group health plan for you, you're disintermediated as an individual,” said Take Command’s Hooper of the current system.
Recent lobbying disclosures show a number of companies and organizations have pushed policy on issues related to HSAs, ICHRAs and HDHPs. They include Centene, Oscar Health, eHealth, America’s Health Insurance Plans, the Employers Council on Flexible Compensation, The ERISA Industry Committee and HealthEquity.
Lurking in the background is the expiration of the ACA enhanced premium tax credits by the end of the year. The Congressional Budget Office estimates 4.4 million enrollees would lose coverage if Congress allows the subsidies to expire.
A strong marketplace is likely to bolster the appeal of ICHRA plans, though the subsidies are not necessarily a requirement for ICHRA growth, said Light.
“To me, that’s a tricky one,” he said. “I think what's going to happen there is it actually will end up having a positive impact on the ICHRA. If people are going to start losing their coverage because they now can't afford it, they're going to look for those dollars somewhere.”