With the economy on the upswing, jobseekers have more employment opportunities now than they did just a few years ago. For employers, that means more competition for the best talent. And to attract and retain that talent, you have to offer an attractive and competitive benefits package.
But rising healthcare costs continue to make it challenging for small or mid-sized businesses to offer traditional employer-sponsored group health plans.
That’s why employers have increasingly been looking to other options such as health reimbursement arrangements (HRAs), health savings accounts (HSAs), and flexible spending accounts (FSAs). These tools provide effective ways to offset increasing healthcare costs without having to sacrifice employee benefits. They also give employees more choices and encourage more consumer-driven healthcare decisions. And they provide attractive tax benefits.
Now employers could have even more health reimbursement tools to choose from.
The U.S. Departments of the Treasury, Health and Human Services, and Labor recently announced a proposal that would expand the scope of health reimbursement arrangements (HRAs) and provide more opportunities for employers to offer HRAs to their workers.
In general, the proposed rules would keep the current HRAs (integrated HRAs, HRAs restricted to excepted benefits, and retiree-only HRAs), but also allow two new types of HRAs:
Individual health insurance premium reimbursement HRA (as long as certain requirements related to nondiscrimination, notice, no other group health plan coverage, etc., are met).
Excepted benefit HRA that allows up to $1,800 per year (plus carryover amounts) in reimbursement for medical expenses (other than health insurance premiums), as long as employees are offered coverage under another employer-sponsored group health plan.
This proposed regulation could eventually transform the health insurance landscape.
Each President’s administration tackles our healthcare issues in a different way. According to the recent announcement, the new HRA proposed regulation is part of the current administration’s plan to “foster competition and choice and to provide Americans – especially employees who work at small businesses – with more options for financing their healthcare.”
But regardless of the administration or the approach, the goal remains the same: giving more people access to affordable health care.
If the proposed regulation is approved and finalized, it should do that and more. It will give employers who have struggled to offer coverage the opportunity to pay for individual health insurance coverage on a tax-preferred basis. The Treasury Department estimates that once employers and employees have adjusted to the new rule, about 800,000 employers will provide HRAs to pay for individual health insurance coverage to over 10 million employees.
The new rule will also expand choices for employees and hopefully empower them to be more conscientious about their own health care spending decisions. And by increasing choices, the new regulation could eventually shake up the health care and health insurance markets, creating a more value-driven market that delivers higher quality care and coverage at lower costs.
That’s a win all the way around.