Experts caution against health reimbursement arrangements

The public comments period ended Friday for a proposed federal rule that would allow more employers to use health reimbursement arrangements — untaxed funds that employers could set aside for employees to use on health care expenses. Most employers are currently prohibited from using the arrangements, which are also known as HRAs.

Pennsylvania Insurance Commissioner Jessica Altman was among those who filed public comments on the planned law change, called “Health reimbursement arrangements and other account-based group health plans.”

“Certain aspects of the HRA proposed rule are to be commended,” Altman said in the comments. Parts of the rule would “safeguard against the risks of discrimination based on health status or other characteristics” and would help to keep the health insurance market stable.

However, she said another part of the planned policy change would do the opposite–potentially harming consumers and shaking the market.

In a recent interview, Altman said a change in the rules may encourage people to purchase short-term, limited duration insurance.

Those plans were almost unheard until August, when the Trump administration reversed an Obama-era rule limiting their use. Since then, some insurance companies have advertised short-term plans as cheap alternatives to Affordable Care Act individual insurance.

Altman has cautioned consumers against using short-term, limited duration plans. She fears that the HRA expansion will allow employers to push higher-risk workers out of group plans — and toward those cheap plans she says don’t offer sufficient coverage.

“If you’re going to pay less for insurance, you’re probably going to get less for the insurance, and that’s a part of the fear,” she said.

Altman said HRAs could allow employers to pay less while leaving some workers at risk of hefty medical bills should they get sick.

At the Pennsylvania Insurance Federation, president and CEO Sam Marshall Marshall said he needs to make sure the policy wouldn’t seek to divide people into healthy and unhealthy groups, something that can leave people without needed care and destabilize an insurance pool.

Marshall compared HRAs to employers “setting up bank accounts” instead of paying premiums. Marshall’s group represents insurers and is still reviewing the proposed rule, which was first introduced in October.

“What does that mean for somebody, whether it’s a high risk individual or anybody?” he said.  “I mean, you or I may not think we have cancer today, and we may get diagnosed tomorrow.”

With public comments over, the U.S. treasury, labor and health and human services departments are expected to move forward with any changes to the policy before making it official. The regulation has drawn industry concern, including this Friday report from Brookings Institute, “Effects of weakening safeguards in the administration’s health reimbursement arrangement proposal.”

The report states that the policy currently lacks safeguards that would prevent employers from shifting sicker workers into the individual market.

“Without the provisions of the proposed rule that aim to prevent employers from using HRAs to shift their sicker workers into the individual market, the Administration’s HRA proposal would lead to very large increases in individual market premiums, thereby increasing costs for individual market enrollees who are not eligible for subsidies and increasing the federal government’s costs of providing premium tax credits,” the report states in its conclusion.