By WSJ “The Editorial Board, July 1, 2019 6:52 pm ET”
By the left’s account you’d think the Trump Administration’s only ambition on health care is to rip insurance from the poor and sick. So note that a Health and Human Services rule finalized last month represents a dramatic expansion in health-care choices for those who may have limited insurance options.
The Trump Administration finished regulations expanding health reimbursement arrangements, often known as HRAs. The arrangements will allow an employer to give a worker tax-exempt dollars to buy a health-insurance plan in the individual market. Such arrangements have existed in some form since the early 2000s, but the Obama Administration used the Affordable Care Act to limit them.
The practical effect of the new rule is to extend the tax advantage for employer health care to individuals who purchase their own insurance. This would help to rectify an injustice in the tax code, which favors employer insurance. The better route economically would be to nix the employer tax exclusion, but Republicans in 2017 couldn’t even agree to nibble at the tax preference as part of doomed bills repealing and replacing ObamaCare. Alas.
The Trump Administration predicts that over time some 800,000 employers will offer health reimbursement arrangements to more than 11 million workers and their families. Some 800,000 would otherwise be uninsured.
Expect the uptake to come from small businesses that lack the economies of scale to offer health insurance. The Administration has noted that only about 30% of workers at firms with three to 24 employees are covered by employer health benefits, down from 44% in 2010. Often employees who have coverage are stuck with the one plan the company offers, like it or not.
One worry has been that employers will dump sick employees onto the exchanges, though the rules include guardrails to prevent cherry picking. Employers can’t single out some employees for reimbursement but offer insurance to others, except for sensible distinctions such as full-time versus part-time workers.
Another concern is that companies with a sick workforce will cancel their health plans and dump workers into the individual market. Yet companies with sick workforces tend to put a premium on the broad networks that only come with group insurance.
The more likely result: Health reimbursement arrangements will be attractive to companies with young or healthy workers who don’t consume many services. This could in turn improve the diversity of the individual-market risk pool. The rules also prevent double dipping into both an employer reimbursement and an ObamaCare tax-credit subsidy.
The main beneficiaries will be those who earn too much to qualify for a subsidy—the Americans most harmed by the Affordable Care Act. Think of a law or accounting firm with about 20 employees. Its risk pool is too small to make employer insurance affordable. But these middle-income workers aren’t currently insulated by subsidies from the individual market’s high premiums.
Remember that companies offer health insurance to compete for talent, and companies are bidding up benefits to retain workers. Large corporations will be compelled to continue to provide the benefits workers have come to expect, even if companies loathe the hassle of administering health insurance.
One miracle is that the GOP has managed to find a political winner that doesn’t reignite the debate over pre-existing medical conditions. Republicans should spend time from here to 2020 telling voters that one party is thinking with ingenuity about how to expand choice—and another is eliminating every option except government-run health care.