The Trump administration has opened the door to altering how healthcare benefits are provided to millions of American employees. A new rule, set to go into effect next year, will allow employers to provide workers with funds to shop for coverage on their own, an option that could dramatically upend employer-sponsored coverage.
Instead of working with an insurer and allowing employees to pick from a few insurance options, employers will be able to funnel money into a standalone tax-exempt HRA (health reimbursement account) and employees could use those funds to shop for coverage on their own, either on the Affordable Care Act marketplaces or off.
“Long term, this added flexibility may reshape a significant number of employer coverage offerings and result in sizable shifts from employer to individual coverage,” Chad Brooker, an associate principal at Avalere who consults on healthcare reform and the impacts on business strategy, said in a statement.
White House officials said the change provides more flexibility to employers and gives workers greater choice when choosing coverage. The White House expects 800,000 employers to choose this defined benefit contribution option, which is expected to affect 11 million employees and their families.
The American Benefits Council cheered the move.
“We commend the Administration for taking what we believe is an important step toward greater flexibility in health care coverage,” the employer group’s president, James Klein, said in a statement.
But others voiced their concerns about potential costs and access issues.
Paul Fronstin of the Washington, D.C.-based Employee Benefit Research Institute said it may be overwhelming for some employees used to relying on their employers to do the bulk of the shopping for them or going to bat for them when an issue with the insurance carrier arises.
“Some people are going to like that and some people are going to hate it,” Fronstin told Healthcare Dive.
Positives of the idea are that it could lessen job lock, when an employee is somewhat stuck in a job because they don’t want to, or can’t afford to lose benefits, including health insurance.
With the unemployment rate near a historic low, Fronstin doesn’t expect large employers to switch immediately. However, when the next recession hits, “I think the future of health benefits gets put to the test,” he said.
But others say the idea that it solves job lock is overplayed.
The options on the ACA exchange, particularly in St. Louis, may come as a shock to employees who are used to robust networks, Kevin Guss, vice president of private client benefit services for St. Louis-based benefits consulting firm J.W. Terrill, told Healthcare Dive.
There are few providers selling individuals plans, out-of-pocket maximums are far higher and many have very limited networks with little out-of-network availability, he said.
“You can save money if you pursue this path, but buyer beware,” Guss said.