New rule gives small/medium sized businesses greater flexibility in providing affordable healthcare coverage
Washington, DC – June 14 – In a decisive move to help small and medium-sized businesses offer improved healthcare options for workers, President Trump’s Departments of Health and Human Services, Labor, and Treasury announced the Health Reimbursement Arrangement (HRA) final rule – a rule change that allows employers to give workers tax-preferred funds to pay for all or a portion of health insurance costs.
This arrangement, called an Individual Coverage HRA, benefits small and mid-sized employers that do not offer coverage to employees due to high costs associated with traditional group healthcare plans. The HRA rule also creates an Excepted Benefit HRA which allows employers to help workers pay for certain medical expenses.
HRAs are employer-funded arrangements workers use to pay for medical expenses. The Obama administration denied workers in the individual insurance market the opportunity to use HRAs to pay for their healthcare coverage. President Trump’s new rule undoes this unnecessary restriction.
“Obamacare created an unnecessary explosion of high costs businesses had to face in providing healthcare coverage for their employees,” said AMAC President Dan Weber. “This rule change will offer hundreds of thousands of small and medium-sized businesses a better path to offering healthcare coverage to millions of American workers.”
The Administration’s new rule allows individual employees the same tax advantage traditional employer-sponsored group healthcare plans receive — exclusion of premiums from federal income or payroll taxes. Starting in 2020, employers will be able to offer their workers HRAs to buy individual market coverage for themselves and their families.
A great majority – 80% of firms – currently offer only one type of plan. Now, workers will be able to use tax-advantaged money from their employers to buy coverage of their choosing. This new flexibility will also allow people to maintain health coverage when they switch jobs.
“Congress has certainly struggled finding ways to fix the many problems with the nation’s healthcare system. Obamacare’s mandates still keep individual market premiums far too high in many parts of the country, but this rule change may launch even more reforms as businesses and stakeholders benefit from a more competitive market,” Weber added.
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