by Robert Moffit
The Trump administration just announced a major regulatory change, effective Jan. 1, 2020, that could significantly expand access to affordable health coverage and increase the choice of health plans, particularly among workers and their families in small businesses.
The proposed rule, jointly developed by the Department of Health and Human Services and the Treasury Department, would allow employer-sponsored health reimbursement accounts to fund the purchase of individual health insurance on a tax-free basis.
Today, workers and their families can use tax-free health reimbursement accounts to offset medical expenses, such as out-of-pocket medical costs. Under the new rule, workers and their families could use employer contributions to the accounts to buy health insurance on their own.
This opportunity is particularly valuable for workers employed by small business owners who cannot afford to offer standard group health insurance, but who could afford to help offset the premium costs of their employees’ individual coverage.
Treasury Department officials estimate that the new rule could encourage as many as 800,000 employers to sponsor health reimbursement accounts, or HRAs, to fund individual coverage for more than 10 million workers.
This relief is crucial, particularly for workers and their families in small businesses. With the enactment of Obamacare in 2010, the already fragile condition of health coverage among small businesses worsened. For little companies with fewer than 25 workers, the percentage of businesses offering health insurance fell from 44 percent in 2010 to just 30 percent in 2018.
The Trump rule has the potential not only to expand coverage, but also to increase employees’ choices in health plans.
Among small and midsize companies (with fewer than 200 employees), 81 percent offered only one health plan as of last year. No choice, just a “take it or leave it” option.
The Trump rule would open up new coverage opportunities for employers and employees.
The rule also has some ancillary benefits for workers already covered by traditional, employer-sponsored health insurance. It would permit employers to contribute up to $1,800 yearly (indexed to inflation) to reimburse workers for certain additional medical expenses, such as dental benefits, as well as premiums for short-term health insurance plans. Such less expensive plans are especially valuable for persons who are between jobs.
The impact of the Trump rule could prove genuinely transformational, if Congress would take the obvious next step: Adopt the reform policies outlined in the Health Care Choices Proposal, developed by a broad coalition of conservative health policy analysts.
That proposal would restore the bulk of regulatory authority over health insurance markets to the states, provide financial assistance for the poor and the sick, and enable persons in government programs to use public funding to enroll in a private health plan of their choice, if they wished to do so.
By enabling states to liberalize their health insurance markets, Congress could enable employees, using health reimbursement accounts as a vehicle for tax-free premium payments, to choose among a variety of new and innovative plans.
Today, enrollees in the broken individual and small group markets are trapped in artificially expensive Obamacare plans. They are punished with explosive deductibles, shrinking choices, and excessively narrow networks of doctors and hospitals.
Working together, Congress and the president could yet achieve the greater policy goal long supported by America’s most notable economists, including the late Milton Friedman: individual tax relief for the purchase of health insurance in a robust and competitive consumer-driven market.
That change could be, in the very best sense of the word, revolutionary.
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