Give Working Families A Break

The Trump administration is using its regulatory authority to provide Americans more flexibility and choices of affordable health coverage, but it should take additional steps to help working families struggling with the cost of health coverage.

The administration has proposed allowing employers to establish defined contribution arrangements that enable their employees to purchase health insurance plans available outside the workplace.

The administration explains that its proposed rule, which would lift some of the restrictions imposed during the Obama administration, is designed to “expand opportunities for working men and women and their families to access affordable, quality healthcare.”

The proposed rule would provide greater flexibility in the use of Health Reimbursement Arrangements. An HRA is a kind of health spending account tied to an employer-sponsored health plan. The money in the account can be used by the employee to pay for qualified expenses, such as medical, pharmacy, dental, and vision.

The administration proposes allowing employers to offer HRAs without also sponsoring health insurance coverage. Employees would be able to use money from the accounts to pay premiums for qualifying individual health insurance policies outside their workplace.

But there is one flaw in the rule: The administration said it doesn’t believe current law would allow HRA funds from one spouse to be used to buy into group health plan coverage offered by the employer of the other working spouse.

We disagree with the administration’s conclusion and submitted comments on its proposed rule for “Health Reimbursement Arrangements and Other Account-Based Group Health Plans.” We argue that current law does allow the integration of HRAs with group health plans sponsored by the employer of a spouse.

As an example, consider that one spouse is offered health insurance at work. The employer may allow the plan to be extended to cover the family but only if the employee pays the full extra costs, which may be prohibitive for this lower-income worker. If the other spouse’s employer offers an HRA contribution, that employee could use the funds to buy into the first spouse’s plan. This working couple could benefit from the ability to combine the HRA funds and obtain a family health insurance plan.

We believe the administration has the authority to include this change in the final rule and thereby expand access to health insurance for lower-income workers who are most likely to be uninsured.

Many workers who are offered health coverage at work do not participate in their employer plans, often because they can’t afford their share of the premiums. According to the most recent data available, 90% of workers were employed in jobs that offered insurance in 2018, but 24% of those eligible did not enroll.

Some employers, especially small businesses, may not have the administrative capacity or be able to afford to offer health insurance plans to their employees. Only 54% of firms with fewer than 50 workers sponsored coverage in 2018. The new HRA rule would allow them to instead provide a defined contribution toward the cost of an individual health insurance policy. The contribution has the same tax advantages of employer coverage in that it is tax free for both the employer and the employee.

The Trump administration has finalized other new rules allowing people to buy more affordable plans through Association Health Plans and Short-Term Limited Duration insurance (the “freedom option”), providing improved options not previously available to them.

But an important new option would be for a spouse to use an HRA contribution to buy into their spouse’s plan at work. (An HRA differs from a Health Spending Account partly in the amount of control an employee has over the account. Unlike an HSA, which is owned by the employee, it is up to the employer to decide whether to allow rollover of any funds remaining at the end of the year in an HRA. Yet another type of account, a Flexible Spending Account, can be used for medical care not covered by the employer health plan but it has use-it-or-lose-it rules; the employee must spend all the money in the account by the end of the year or lose the remaining balance.)

In developing the proposed rule, the administration says it considered whether to allow an HRA contribution to be used to buy into a group health plan maintained by the employer of the participant’s spouse. But the administration decided against it and said it was “not proposing such a rule because allowing such integration would add significant complexity to the individual health insurance coverage integration test.” They invited comments on whether it could be allowed.

The proposed HRA rule acknowledges that group health plan coverage is generally compliant with relevant Public Health Service Act (PHSA) requirements, in particular those that prohibit plans from imposing annual or lifetime limits on coverage of essential health benefits and that require coverage of preventive services without cost-sharing.

Our comment letter rejects the administration’s contention that providing working families with this option would “add significant complexity.” Since the group health plan sponsored by the spouse’s employer is required to meet the PHSA standards, the other spouse should be permitted to use an HRA to join that plan.

Working Americans should have the option to use their HRA either to buy individual coverage or to enroll in the same group health plan that covers their spouse.

The administration had to work hard to navigate a thicket of existing law and regulations from the Departments of Labor, Health and Human Services, and Treasury, including the Internal Revenue Service to create the proposed HRA changes, and it deserves credit for offering additional HRA flexibility for employers and employees. But taking this next step when the final rule is issued to allow funds from one spouse to be used to buy into group health coverage offered by the employer of the other working spouse would significantly increase access to health coverage for many of those struggling most to afford it now.

Including such a provision in the final rule would make group health insurance more affordable and expand coverage to many who currently are unable to afford it. We urged its inclusion.