Senior Policy Analyst
The Trump Administration has finalized a rule to expand health reimbursement arrangements (HRAs) that it predicts will shift, by 2029, 7 million people from traditional group health plans to individual plans that people can buy with help from a limited employer cash contribution. This sizable shift toward HRAs is expected to cost the federal government $51 billion and raise premiums in the Affordable Care Act’s (ACA) health insurance marketplaces while enrolling fewer than 1 million people in new coverage.
The new rule, which the Administration finalized last week, lets employers forgo offering group coverage to some or all workers and instead contribute to a tax-free account for employees to use to help buy their own coverage. A second option under the rule, the excepted benefits HRA, lets employers set aside up to $1,800 per year for employees to pay premiums for certain limited benefit coverage (such as a vision plan) or for short-term health plans, which have large coverage gaps and other shortcomings.
The new rule could:
All told, the rule will likely cause a sizable shift in where workers get coverage. The Administration forecasts that 11.4 million people will participate in individual coverage HRAs by 2029. The $51 billion that it will cost, in reduced tax revenue, could instead be used to provide more targeted help to people who remain uninsured, such as by increasing marketplace subsidies, without any of the rule’s significant downsides for other consumers.