HRA expansion looms as key issue in Trump insurance reform package

If you’re the owner, manager or human resources point-person for a small-to-mid-sized business, you are likely carefully monitoring the ongoing Republican Party tinkering with the Patient Protection and Affordable Care Act.

But if you’re with a major employer, you may identify more with President Donald Trump. Right now, there are bigger fish to fry, and the ACA is on your back burner.

It’s not that the GOP has given up on revising what many consider to be the major accomplishment of the Obama era. But with mid-term elections approaching, international issues igniting strong responses here and abroad, and an instinct toward avoiding major mistakes, Republicans in Congress are finding it difficult to reach consensus on how ACA reform should look.

Related: Is Obamacare dead? No one told the IRS.

The widespread opposition to Trump’s reforms aren’t encouraging to those who said they would dismantle the ACA.

The Los Angeles Times reported that “[m]ore than 95% of healthcare groups that have commented on President Trump’s effort to weaken Obama-era health insurance rules criticized or outright opposed the proposals,” with attacks coming from large insurers to hospital groups to patient advocacy organizations. Large employers are less concerned about the current health plan policy debate. They would like to see the controversial excise tax on plans repealed once and for all; the tax has been postponed until 2022 but still hangs over their heads.

“For many large employers, whether or not the Republican Party can overhaul or dismantle the Affordable Care Act isn’t the focus,” says Steve Wojcik, vice president, public policy, National Business Group on Health, an association of large employers. “We just want to know what we have to do to comply. We will do what we have to do whether it’s replaced or not.”

Wojcik notes that the current discussions around offering non-ACA compliant health coverage, such as short-term plans or health reimbursement coverage, don’t affect large employers as much as smaller ones. Enterprise level companies are going to continue to offer a robust benefits package to employees. “Providing greater value in their own plans is more likely the focus for large employers. They want to use that benefits package to encourage new hires and retain talent. They’re not looking to cut benefits package costs if it puts them at a competitive disadvantage.”

Wojcik does acknowledge that HRAs could make sense to some large employers, depending upon the final form they take.

“Down the road they could have some impact” for large employers, he says. “We can offer an HRA now for retirees to help them on the individual market. As an option for employers in future it could be something of significance.”

Particularly for “middle ground” employers—those with 50-200 employees—it could be a way to offer coverage to less healthy employees so the cost of insuring them isn’t reflected in the group plan.  IRS Notice 2013-54 currently prevents this from occurring, but it is something that the administration is expected to push for.

Sabrina Corlett, a research professor at Georgetown University, agrees that HRAs are the most attractive “reform” item for employers. But depending upon how Trump’s team crafts the policy, insurers in the individual plan market could take a hit. The result could be yet more premium increases, again threatening the “affordable” component of the ACA.

Corlett runs the Center on Health Insurance Reforms, which is attached to Georgetown, and believes the GOP will only be able to push through such regulatory reforms as expanding employer plan options. She doesn’t see any hope for dismantling the act or even pushing through a major overhaul, given the risks involved in an election year.

But regulatory policy shifts don’t need Congressional approval and are still very much on the table. “Congress tried to encourage HRAs for the small [employer] market. But the administration is focusing on large employers as well,” she says. “We are expecting this administration to make it easier for large employers to use it.”

While HRAs and short-term plans would clearly be attractive to small businesses, the individual health insurance market wouldn’t be especially hard hit unless the policy appealed to many large employers.

“The devil is in the details,” Corlett says. ”There are critical policy decisions to watch for. Does the policy give employers the option of offering an HRA with a traditional plan? Or do they have to choose? If large employers can offer both, it could impact how they affect the [individual plan] market.”

The option to offload the highest risk employees to the individual market by making a predictable contribution to their coverage might be too appealing to pass up, she says.

“Clearly the policy goal here is to give employers a greater set of choices in benefits plan designs to offer their employees,” she says. ”The constraints could have an impact on the individual market risk pool depending on how they are designed.”

Should large employers have the option to offer both plans, “they’d be crazy not to do it,” says Matthew Fiedler, a fellow at the Brookings Institution.

“Given the size of the employer market, [offering options] could be catastrophic,” he says. “Especially if you’re offering an HRA to a self-insured employer. It’s quite financially attractive.”

Combined with the broadening of the availability of short-term plans, another key Trump proposal, the dual option for employers would force exchange insurers to boost premiums. Add to this the effects of repealing the mandate for coverage next year, and a very uncertain future lies ahead for exchange insurers.

“If the administration takes an expansive approach, there could be wider ranging changes to how employers structure their benefits packages,” Fiedler predicted.

Meantime, employers are, like the insurers, watching and waiting to see what the administration will unveil. In an election year as significant as this one is shaping up to be, timing will be everything—and the proposals could remain simmering on that back burner until the votes are cast in the fall.