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Employee Benefits Expert Expects HRA Rule to 'Shake Up' Insurance Markets

Analysis  |  By Jack O'Brien  
   July 08, 2019

Cowden Associates CEO Elliot Dinkin said the new rule issued by the Trump administration could have a wide-ranging impact.

Less than a month after the Trump administration released a final rule on expanding access for tax-free health reimbursement arrangements (HRA) for employer-sponsored health insurance, an employee benefits expert said the move could have a "significant impact" on insurance markets.

Cowden Associates CEO Elliot Dinkin said the rule, which lets employers offer HRAs as an option for paying premiums on Medicare policies or purchasing health coverage, would provide "some protection" to covered individuals while addressing out-of-pocket costs associated with individual coverage.

"The new rule provides some flexibility to employers who would otherwise have been forced to either provide benefits or cancel coverage," Dinkin said in a statement. "This gives employers an alternative in employee health coverage. If it works the way it is apparently designed to work, it could have a significant impact on the health insurance market while also creating a defined contribution alternative."

The new rule was released jointly in mid-June by the Department of Health and Human Services, Treasury, and Labor, and takes effect in January 2020.

Related: Trump Administration Proposal Expands Access to HRAs

After the rule was proposed in October, it received a warm welcome as a way to expand coverage options and curtail the potential for adverse selection, whereby employers put their sickest employees on the individual marketplace.

The Trump administration predicts the policy change will benefit more than 800,000 employers and 11 million employees, as well as 800,000 individuals who were previously uninsured.

Dinkin said restrictions on how employers decide eligibility for HRAs, based on "objective non-discriminatory criterion," will curb the potential for adverse selection.

Additionally, a former Obama administration health official told HealthLeaders in October that the move displayed how much the Trump administration "cared about protecting the individual market from adverse selection." 

Related: Trump HRA, Drug Pricing Proposals Confound Expectations

The final rule did not come without its share of criticism, as the America's Health Insurance Plans sent an open letter in January urging the administration for an 18-month delay prior to implementation.

Related: Health Insurers Want More Time For Trump's HRA Proposal

Critics still remain skeptical about the potential for employers to push away their high-risk employees, with some speculating the large employers won't even be interested in offering HRAs.

Kim Buckey, vice president of client services at DirectPath, told HealthLeaders last month that small to midsize employers might be interested in HRAs but could be turned off by the "compliance and administrative aspects" of setting it up.

Related: With One Hand, Administration Boosts ACA Marketplaces, Weakens Them With Another

Jack O'Brien is the Content Team Lead and Finance Editor at HealthLeaders, an HCPro brand.

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