More health care options are coming. The Trump administration has proposed a new rule that gives workers more health insurance options. It could, writes Chris Pope, become the first step away from the employer-provided health insurance model.
While only 9 percent of employers offer a health plan with a narrow network, 73 percent of individuals responsible for purchasing their own coverage opt for narrow network plans. These are on average16 percent cheaper than comparable broad network plans, and areparticularly popular with younger enrollees. Not only must broad network plans pay for more expensive doctors and hospitals, they have less leverage to get good deals from relatively low-cost providers. This problem is compounded for self-insured plans, which account for 61 percent of employer-sponsored insurance. Under those plans, insurers merely process claims, and pass on medical costs incurred to employers.
The Affordable Care Act sought to remedy the bias of the tax code towards employer-sponsored insurance by imposing a 40 percent “Cadillac tax“ on high-cost healthcare plans. But making employer-sponsored coverage more expensive would do nothing to make insurance more affordable for individuals to purchase, and might instead push millions into public entitlements. The implementation of this tax has rightly been delayed, and is likely to be repealed altogether.
A regulation proposed by the Trump administration attempts a more constructive approach. Acting within the existing tax code, it would allow employers to deposit funds in Health Reimbursement Accounts for individuals to purchase their own preferred health insurance coverage. (Previously, HRA funds could only be used to pay out-of-pocket expenses associated with a group plan.) [...]
The Trump administration’s rule allows employers to deposit up to $1,800 in HRAs to subsidize the purchase of plans that are exempt from the ACA’s regulations, so long as employers subsidizing HRAs continue to provide the option of a comprehensive benefit package compliant with the ACA’s minimal essential coverage requirements. The premiums of the recently deregulated plans average $1,488 per year, compared with $4,716 for ACA-regulated coverage. As such insurance would be portable between jobs, and subject torenewal guarantees, it would also protect individuals from the risk of being disqualified on the basis of having developed a pre-existing condition prior to seeking new coverage associated with a change in employment status.
[Chris Pope, “Should We Move Away from Employer-Sponsored Insurance?“ Economics 21, November 30]
