We’ve written several posts on the topic of healthcare, but the challenges of not being able to offer healthcare benefits to our employees in 2020 is a major problem for small businesses. And after 8 year of screaming to “Kill Obamacare” and 4 years of squawking and inaction, what do we have? A complete and total mess of a healthcare system as we head into the 2020 election, with a recycled previously ineffective solution – HRAs.
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What about HRAs?
In 2019, the Trump administration resuscitated a not-so-new solution: healthcare reimbursement plans, or HRAs. These new healthcare guidelines went into effect on January 1st, 2020.
An HRA allows employers to contribute money to their employees’ accounts so that they can use the funds to purchase healthcare on their own in the individual marketplaces. The money contributed is not taxable to the employee and the employer can take a tax deduction for the contribution. Any unused portion of the account may be carried forward to subsequent years, just like a retirement account.
HRAs were commonplace before the 2010 Affordable Care Act, which effectively neutralized them.
According to some, it could be a real boon to small businesses.
“Many employers would love not to have to bear the administrative burdens of running a traditional health plan, and all are looking for ways to keep health costs down,” Michael Kolber a partner at Manatt Health, a healthcare advisory and compliance firm, wrote in the Hill. “If millions more people join the individual market through HRAs, these plan design features could change to look more like conventional employment-based coverage – or HRAs may further incentivize lower-premium plans, reinforcing the need for less comprehensive plans.”
Steve Wojcik, a vice-president of public policy for the National Business Group on Health, also believes that the new HRA ruling may be a good option for small employers, particularly those that can’t afford to offer group coverage. “It will allow them to help employees who go out and get coverage on their own and they can help out with premiums,” he told UPI. “That’s how it will be used in the short term.”
This is NOT law. It is a ruling. There is a big difference. It actually conflicts with the ACA, and it is currently being litigated in court. So, two things can happen. First, the ruling can be canceled by the courts. Second, it could be overturned if Trump loses the next election. Meaning all of this could be for naught in less than 12 months. Not a reassuring thought for many small business owners thinking about healthcare for 2020 and beyond in the modern set-up.
Therefore, many small business owners (including myself) aren’t likely to cancel existing healthcare plans immediately. Smart business owners will want to know the impact of these plans on themselves and their workers. To date, no real guidance has come from the administration so unless you want to hire an employment lawyer, you’re likely going to have to wait and see.
Next, there is no guarantee that rates will be lower. In fact, “If employers were able to ‘dump’ their high-risk employees into the individual market through an HRA (with the goal of reducing their own group health plan costs), it could have significant consequences for the individual market risk pool,” writes Katie Keith on Health Affairs. “This could result in worse overall risk profiles and lead to higher premiums, higher federal outlays for premium tax credits, and a higher uninsured rate.”
Will HRAs Survive? How Should I Prepare My 2020 Healthcare?
On this, your guess is likely as good as mine. However, if HRAs do catch on with small business in 2020, then aside from a court order, it would be more difficult for the government to eliminate them. However, I’m not holding my breath.