Ever since President Donald Trump signed an executive order Thursday designed to expand health insurance options for some Americans, employers have been advised to consider the potential implications for themselves and their employees.
Under Trump’s order, small employers would potentially be able to band together from across the country to create association health plans and buy insurance through those plans outside of the Affordable Care Act. The order also calls for expanding the availability of low-cost, limited, short-term insurance plans, as well as the use of health reimbursement accounts, a tax-advantaged option to pay for healthcare expenses.
EBN spoke to Mark Johnson of Creative Benefit Solutions about how he is communicating with employers about the action and the need for ongoing updates. What follows is an edited version of the conversation.
EBN: What are the most immediate impacts of the order; do you anticipate it will impact Q1 open enrollment?
Johnson: Based on what I understand, under the executive order, HRA changes are not subject to be implemented for at least 120 days.
I think the HRA is a good vehicle for an account-based strategy. We make that recommendation as often as possible and is probably one of the more frequently recommended products that we offer to our customers in setting up their health insurance benefits.
HRAs became an intricate part of health insurance when the move in the marketplace was to increase out-of-pockets exposure to the employee. The HRA is a good vehicle to overcome some of the issues around the structure of health insurance that has been evolving over the last 10 years.
By relaxing some of the regulations, it is a positive thing for the employer and employee. I think that’s all positive. I can’t see any negative side to using HRAs other than [lack of] education and understanding [about the products].
EBN: What are the potential effects of loosening of rules surrounding the issuance of health plans by employers?
Johnson: You already have a lot of national players when you look at health insurance, your big insurers that are national players and offer coverage in most states. Then, you have some of the regional smaller players that offer health insurance in smaller markets.
Setting up those associations — that practice exists today — so I’m curious to know more about that particular part of the executive order because the details are really gray. There is not a lot of direction on how that is going to flow.
If you look at state lines and removing commonality and geography and allowing employers to partner and collaborate to do associations, that becomes more complex because there are a lot of state regulations.
Depending on how you structure your benefits, it would almost require an employer to take on more risk and lose control. On associations, you get the benefits of collective buying, more lives and more negotiating power. But, you give up controls around eligibility rules and the structure of the benefits. You have to buy in what the association’s overall statute is.
On one side, it could be good, such as the cost side. On the other side, as an employer and as your company evolves, what was good for the association in 2018 may not be good in 2020. The association creates another box you need to deal with. Association plans exist today and a lot of times companies run to them when they have bad losses and experiences. Then, as things get better, they try to move away . It’s not a perfect solution, but I’m curious to know more about what rules they will relax to allow for that to happen and how that will happen with all the complexities around state rules.
EBN: How does this EO impact enrollment in short-term health insurance plans?
Johnson: Short-term medical is typically for those that have lost coverage or an entrepreneur moving between companies. Just as the name indicates, it serves a specific need around needing coverage for a short window of time to get you from one place to another. There are some restrictions under the current law that you can only have short-term medical for a limited amount of time. Expanding that and giving people more time to find the best solution for them, I see that as a positive. But I don’t see it being something earth shattering that will lower cost for all Americans. It’s not that great of a solution for anything that is complicated in healthcare.
EBN: How should advisers be communicating these changes to small business clients?
Johnson: You have to make sure they understand the pros and cons of HRAs. They need to understand how to execute and use an HRA to their benefit. That is communication. Our goal is to make sure we make sure that we our employer groups that we deal with, they explore all of their options. That is one of many. That one typically we see a lot of bang for buck.
Some people offer gap coverage that is insurance that pays for the out-of-pocket expense. That is one option, but we like the cash flow to be on the employer’s advantage. The HRA gives them a vehicle to save for future expenses, versus paying premium for insurance that they don’t use. Just making sure they understand how to deploy and use that as employee benefit. Educate, educate and educate. We keep it on our recommendation sheet year after year until they fully grasp it.
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