Smart Changes to HRAs Will Expand Health Insurance Choices, Congress Can Help with Costs by Addressing the HIT Tax

By at 20 June, 2019, 4:24 pm

by the SBE Council Team-

On June 14, the Trump Administration released a final rule on health reimbursement accounts (HRAs), and SBE Council president & CEO Karen Kerrigan said the announcement is a “very big deal” for small businesses and their employees.

Kerrigan and several SBE Council members were at the White House for a Rose Garden event, where President Trump highlighted the benefits of the HRA changes along with other initiatives advanced by the Administration to bring more affordable health insurance choices to small businesses, their employees, and the self-employed. In a press release, Kerrigan said:

“The new rules on HRAs will address a big gap in the marketplace for affordable health coverage options, especially for small businesses and their employees. The changes are a very big deal for small businesses, as many need to offer health coverage in order to compete for workers in the tight labor market. They also want to do the right thing by offering coverage options, and the new and improved HRAs allow entrepreneurs to do just that. We thank President Trump and his team, not only for their work on HRAs, but all the solutions this Administration has put forward to foster more competition, innovation and affordability in the health insurance marketplace. These solutions and policies mean more self-employed entrepreneurs, small businesses and their families have access to health care.

Allowing employees to use HRA funds to purchase the individual health coverage that best meets their personal needs is true choice. And allowing the use of the funds for benefits such as dental and vision care adds tremendous value for health consumers and their families.”

The Administration estimates that 800,000 businesses and 11 million workers and their families will benefit from the new rules that liberalize HRAs.  These are changes that SBE Council has been advocating for more than a decade, and this action taken by the Administration is a key priority as outlined in SBE Council’s “2019 Policy Agenda for Entrepreneurs and Small Business.”

Related reading: Trump Could Revolutionize the Private Health Insurance Market, Washington Post Op-ed

Positive Reforms Advanced, and in the Works

The positive news on HRAs builds upon several favorable regulatory changes that are improving choices and affordability in health coverage for small businesses and their employees. For example, changes to short-term limited duration plans made in August of 2018 by the Administration have improved a niche option for the self-employed, startups, and people who transition in and out of the workforce due to personal reasons. 

In fact, employees will be able to purchase a short-term plan with HRA funds if that is what they need, thanks to the new rules announced on June 14. Giving businesses and individuals more choices and more control over the type of coverage they want and need, and at the price point they can afford, is exactly what the Trump Administration has been working to achieve through these reform efforts.

Our regulatory system must take into account how people currently work, what they can afford, how they want to work if they have major life changes, or want to open a business.  The cumulative effect of all these reforms will help small businesses succeed, encourage more entrepreneurship, and provide more people with access to health care.

What’s Next? Congress Must Act on the HIT

Congress can also take action to lower heath coverage costs for small businesses.

Bipartisan legislation has been introduced to repeal the health insurance tax (HIT), a costly levy imposed as part of the Affordable Care Act that directly hits the health insurance policies of small businesses and their employees.  Action has been brewing in Congress to address this burden, and this must happen very quickly in order to have a positive impact on health insurance premiums for next year.

A widely supported bipartisan bill introduced in both the House and Senate (H.R. 1398 and S. 172) that has the most momentum would extend the current moratorium on the HIT for two additional years.  Again, extending the moratorium right away would help to ensure that prices do not increase for 2020.

Small business owners and entrepreneurs want to see Congress working together to resolve important issues, like high health coverage costs. Extending the moratorium on the HIT would be welcome news for small business owners who need some certainty for planning purposes going into 2020.




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