Exchange: Proposed rule change could allow employers to force sick workers into individual market
Nevada’s health insurance exchange submitted comments to the federal government on Tuesday arguing that a proposed rule change could allow employers to push their sickest workers into the individual health insurance market and increase premiums on the exchange.
In its comments, the exchange outlined concerns that the rule could allow companies to force their highest-cost workers into individual health insurance plans paid for from an employer-funded health account. Heather Korbulic, the exchange’s executive director, wrote that the rule would significantly change the way that employers are allowed to provide health insurance for their employees.
“Allowing employers to offer employees health reimbursement arrangements (HRAs) in lieu of a group health plan is a significant departure from current limits on employer options to provide coverage, yet the potential implications for employers, employees, and the individual market are largely unknown,” Korbulic wrote.
Comments on the proposed rule, put forward on Oct. 23 by the Departments of the Treasury, Labor and Health and Human Services, are due Dec. 28.
Under existing law, employers are allowed to place money for medical expenses for their employees into accounts known as health reimbursement arrangements (HRAs) on a pre-tax basis. The rule change would allow employees to use funds in their HRAs to pay for premiums and out-of-pocket costs for plans offered through the individual market, either through the state’s health insurance exchange or off the exchange.
Employers wouldn’t be able to give employees a choice between a traditional group health insurance plan and an individual market HRA, but the rule would allow employers to offer different plans to different classes of employees as outlined in the rule. For instance, a company could offer traditional health plans to full-time employees and individual market HRAs to part-time employees and employees under the age of 25.
In statements accompanying the proposal, administration officials heralded the rule as expanding health-care choices for employers and employees alike.
“Of those smaller employers that provide health benefits, 81 percent offer only a single option. This proposal is about empowering American workers to have more consumer-driven healthcare choices,” Labor Secretary Alexander Acosta said in a statement. “Health Reimbursement Arrangements can provide another way for employers to help their employees access quality, affordable health coverage.”
But Korbulic wrote in her comments that the proposed rule could allow employers to combine different classes of employees in a such manner that would effectively allow companies to single out their sickest workers. Though the rule outlines eight different classes of employees, it also allows employers to combine those classes to make even more specific classes, such as part-time employees under the age of 25.
“The proposed rule would allow small employers to combine classes in such a way as to define a small category of higher-cost employees that would be offered an HRA instead of the employer’s group health plan,” Korbulic wrote. “The Exchange therefore recommends that the (departments) prohibit combining classes in small firms. For large firms, the rule should require that combined classes meet a meaningful threshold for number of employees that meet the definition.”
Korbulic also wrote that should employers be allowed to offer employees a choice between the two plans — something that isn’t included in the proposed rule but a point that the federal government is soliciting feedback on — sicker employees may be pushed into choosing an individual market HRA, which could raise premiums both on and off the exchange.
“The Exchange strongly opposes allowing employers to offer employees a choice between an integrated HRA or enrolling in the group health plan,” Korbulic wrote. “While on its face appealing, such flexibility would in practice likely lead some employers to encourage higher cost employees to use an HRA to buy coverage through the ACA-compliant individual market. While this would improve the employer’s risk pool, it would lead to a sicker pool of enrollees in the individual market and higher premiums for Exchange coverage.”
Korbulic also raised concerns that workers offered an individual market HRA may be confused about the best option for purchasing affordable health insurance on the individual market. The proposed rule would allow employees for whom an individual market plan remains unaffordable given the amount of money in their HRA to forego their HRA and instead purchase a plan on the state’s health insurance exchange with federal subsidies.
“The Exchange is concerned that this proposal will result in considerable consumer confusion and require states and Exchanges to spend additional resources to educate consumers, help them evaluate their options, and reduce the risk that they would obtain – and ultimately have to pay back – subsidies for which they are later deemed ineligible,” Korbulic wrote.
The rule change would also create a so-called excepted benefit HRA that would allow employees to use money in a different type of HRA to pay for short-term, limited duration insurance policies, among others. Both the exchange and the Division of Insurance have been sounding the alarm about short-term health insurance policies — intended to provide coverage during a short-term insurance gap but expanded by the Trump administration this year — being falsely marketed as Affordable Care Act-compliant plans.
In light of those concerns, Nevada’s health insurance exchange is urging the federal government to delay implementing the rule until at least 2021 to allow states and exchanges to further analyze how the rule change would affect the employee and individual health insurance markets, including premiums on the exchanges.
The exchange is also asking the Treasury Department to provide states with data on individual market HRAs and excepted benefit HRAs used to purchase coverage once the rule goes into effect.
“Understanding not only the number of individuals enrolling with an HRA but also the firm size and HRA contribution amounts, at a minimum, will be necessary to allow states to understand the implications of the new HRA options on enrollment and premium trends,” Korbulic wrote.