BEYOND THE NUMBERS
Health Bills Headed for a Vote in the House Undermine Consumer Protections and Market Rules
The House is moving toward a vote on legislation that would weaken Affordable Care Act (ACA) consumer protections and private market rules. Proponents of these changes claim they will increase choices and reduce red tape for employers, but a closer look shows the problems they would create. The legislation would:
- Expand association health plans (AHPs). The legislation would allow AHPs, a type of health plan that trade associations, professional groups, and other organizations may offer their members, to cover self-employed individuals and small businesses as if they were large employers. This would exempt them from ACA standards that otherwise apply to health plans in the individual and small-group markets. Similar to a Trump-era rule a court struck down in 2019, the bill would segment insurance risk pools: some individuals who are younger and healthier, or small businesses whose employees have that profile, could get plans with lower premiums because they would be priced separately from ACA-compliant coverage and would not have to meet ACA standards, such as a requirement to cover a set of essential health benefits. As a result, other individuals and small businesses remaining in ACA-regulated markets would see higher premiums.
Expand Individual Coverage Health Reimbursement Arrangements (ICHRAs). The legislation would codify provisions similar to a Trump-era rule currently in place that allows employers to forgo offering a regular group health insurance plan and instead offer an HRA (a tax-favored, employer-funded account) that workers could use to buy their own individual insurance coverage. Increasing such arrangements could raise ACA marketplace premiums; they are likely to attract sicker-than-average firms that can spend less to fund an ICHRA than they must pay for a group health plan. And firms may find strategies to shift sicker workers to HRAs, even with guardrails in the legislation meant to prevent this.
Plus, these arrangements require employees to do considerable work compared with signing up for an employer plan — they must apply for and select a plan, set up premium payments, and understand what expenses the ICHRA covers. Also, workers offered an ICHRA could be confused about whether the offer renders them ineligible for a marketplace premium tax credit — that is, whether it constitutes an “affordable” employer offer that precludes credit eligibility. And while employers must give workers a notice of HRA rules, they needn’t personalize them to tell individual workers whether their plan is affordable. These complications for employees could drive down coverage.
- Increase self-insured employer plans. Another provision would encourage more small employers with healthier workers to self-insure (meaning that the employer bears the financial risk), rather than offering a fully insured health plan (for which an insurer bears the risk). Specifically, the bill would protect a complex self-insurance arrangement known as level funding from tighter regulation. Similar to AHPs, this scheme allows small firms with healthier workers to provide plans that avoid ACA small-group market premium and benefit standards without being a large employer or taking on the risk of self-insurance. This provision would make level funding an even more common way for smaller firms to avoid having to offer plans that meet ACA market rules — this would raise premiums for small businesses that remain in the fully insured, small-group market if small firms with younger and healthier workers move to self-insure.
House committees recently approved other health bills that raise concerns. The Ways and Means Committee moved to expand health savings accounts (HSAs), which overwhelmingly benefit high-income people and exacerbate racial and ethnic inequities in coverage access and wealth accumulation. HSA tax benefits currently are only available when someone has a high-deductible health plan that meets certain federal rules. But the committee approved a bill that would allow high-deductible plans to cover telehealth services pre-deductible, while still qualifying for HSA tax benefits. It is estimated to cost $5 billion from 2025 through 2033.
Another bill, approved by the House Education and Workforce Committee, would let employers offer workers stand-alone telehealth-only plans and exempt the plans from providing ACA consumer protections or meeting other federal laws that otherwise apply to employer coverage. The bill would exempt telehealth plans from, for example, covering mental health care at parity with other care and providing preventive services at no cost to enrollees. The plans could also impose annual and lifetime limits on coverage and sharply limit the types of conditions they would address.
Additional policy changes are needed to make health coverage and care more affordable for many people, despite the ACA’s significant benefits for individuals and small businesses. But the legislation heading to the House floor is misguided. It would undermine consumer protections, segment insurance markets, and impose new burdens on individuals to navigate an already complex system.