How the new short-term health plan regulations impact employers and employees

In a move aimed at reshaping the health insurance landscape, the Biden administration has implemented stringent regulations on short-term health plans. These plans, often criticized as “junk plans,” have long been contentious due to their cheaper premiums and limited coverage options.

Under the new rules, short-term plans are now restricted to a maximum duration of three months, with a one-month extension available. This marks a significant departure from the previous regulations enacted during the Trump administration, which allowed these plans to extend up to three years.

Why employers and employees should care

The implications of these regulations extend far beyond policy. Understanding the impact of these changes is crucial for both employers and employees. With a significant portion of Americans obtaining insurance through their employers, any alterations in the health care landscape ripple through the workforce.

According to data compiled by SureCo, an ICHRA administrator for large groups, nearly half of all employees have contemplated seeking coverage outside of their workplace offerings. This trend underscores a growing dissatisfaction with traditional insurance options and a willingness to explore alternatives, including the ACA marketplace and short-term plans.

Employers have a vested interest in ensuring the wellbeing of their workforce. However, short-term plans, often touted for their affordability, can leave people vulnerable to unexpected medical expenses and inadequate coverage. This not only jeopardizes employees’ health but also exposes them to financial strain, undermining productivity and morale in the workplace.

In light of these challenges, employers have an opportunity to reassess their approach to health care benefits. Embracing innovative solutions like Individual Coverage Health Reimbursement Arrangements (ICHRAs) can empower employers to provide comprehensive coverage options while containing costs. By leveraging ICHRAs, employers can offer greater flexibility and choice to employees, fostering a healthier and more resilient workforce.

Impact on the ACA marketplace and ICHRA

The regulatory changes surrounding short-term plans have broader implications for the ACA marketplace and emerging alternatives like ICHRAs. Short-term plans, characterized by their non-compliance with federal guidelines, threaten the stability of the ACA marketplace. By siphoning away healthier individuals with lower premiums, these plans could contribute to an adverse selection dynamic, leaving the marketplace burdened with a disproportionately sicker pool of enrollees.

Conversely, ICHRAs offer a promising avenue for employers seeking to navigate the evolving health care landscape. By embracing ICHRAs, employers can provide their employees access to affordable comprehensive coverage, mitigating the allure of short-term plans. ICHRAs can also empower people to select coverage that aligns with their unique needs and circumstances, promoting a more consumer-centric approach to health care.

Related: New year, new health insurance model: It’s time to take control

Employers need to offer another solution

The regulatory changes surrounding short-term health plans amplify the need for employers to adapt and innovate in the realm of health care benefits. While short-term plans may offer a temporary fix for some people, the plans’ inherent limitations and risks necessitate a more strategic approach to employee health care.

Employers play a pivotal role in shaping the health care landscape for their workforce. By prioritizing employees’ wellbeing and embracing solutions like ICHRAs, employers can not only navigate the complexities of regulatory change but also foster a culture of health and resilience within their organizations.

Ultimately, the shift towards comprehensive and sustainable health care benefits is not just a regulatory mandate but a strategic imperative for employers committed to their workforce’s long-term success and wellbeing. As the health care landscape evolves, employers need to seize the opportunity to lead the way toward a healthier future for all.

Erik Wissig is SureCo’s CFO & COO and works across all areas of the company, supporting teams with strategic execution and management. SureCo is an ICHRA health insurance company servicing businesses, benefits consultants, and consumers.