Trump Administration Substantially Boosts Healthcare Freedom for Employees
The Department of Health and Human Services has published a new rule that will promote the portability of health insurance. The rule may be the most significant the Trump administration has published related to healthcare freedom since it could put more people in charge of their health insurance, rather than their employer.
According to the most recent data available, in 2017 more than 159 million Americans received health insurance coverage from their employer, while 20.5 million had purchased health plans on the individual market. More than 112 million were on some form of government-run health plans, such as Medicare or Medicaid.
American reliance on employer-sponsored health insurance coverage has existed since 1943, when the Internal Revenue Service exempted certain employer-provided benefits from taxation. Employers used benefits to attract workers to get around wage and price controls mandated by President Franklin Roosevelt. Congress made the exemption permanent in 1954.
There are problems with this system, however. Ultimately, the employer-based health insurance system isn’t responsive to employees because employees don’t own their health plans. This system also reduces choice. Insurers don’t look at employees as their customers, rather health insurance companies treat the employer or third-party administrators as the customer. The system also locks employees into their jobs out of a fear that if they leave, they may lose access to health insurance.
When he served in Congress, Rep. Tom Price (R-Ga.) acknowledged this problem. He introduced the Empowering Patients First Act to address the issue. The legislation allowed employees to opt out of employer-sponsored health insurance coverage in exchange for a monthly tax credit to purchase a plan on the individual market.
“When you own [your health insurance], then they know you’re the customer,” then-Rep. Price said in a January 2015 interview. “That means that [health insurance companies] want to be responsive to you and what it sets up is a system that’s much more patient-centered than government-employer-centered.”
The new rule published by the Department of Health and Human Services isn’t the same as what then-Rep. Price proposed, but it certainly shares the spirit. The rule has the potential to put employees in control of their health insurance coverage by making their health insurance portable. If an employee leaves his or her job, the employee won’t lose access to their health insurance plan.
The rule expands Health Reimbursement Arrangements (HRAs) to make them available to more Americans. HRAs already exist, but only businesses with fewer than 50 full-time employees can use them to buy health coverage for their workers. The rule expands HRAs to make the accounts available to all employers, regardless of size, for employees to purchase health insurance coverage.
Employers would provide employees with a monetary contribution, either monthly or annually, to purchase health insurance coverage. Employees would use the monetary contribution to purchase any off-exchange plan on the individual market. Like the monthly contribution from employers, employees may pay the difference between the employer contribution and the health insurance premium on a pre-tax basis as long as the plan is not purchased on the Obamacare exchange.
Employees are empowered under HRAs because they get to choose which health plans they want and which provider networks, such as doctors and hospitals, they want. The decision is theirs and not left to an employer or a third-party administrator. As more people come into the individual market, competition between insurance companies will increase and premiums will stabilize.
Democrats want to either eliminate private health insurance, employer-sponsored and the individual market, and would replace it with a government-run, single-payer system. Alternatively, they aim to create a public option that would undercut insurance companies and eventually collapse private health insurance. Putting the government in charge of your healthcare is one of the worst ideas in the long, sad history of bad ideas. The HRA rule is a tremendous opportunity to begin to change the direction of the American healthcare system in a patient-centered direction by empowering employees to make decisions about their health insurance and their healthcare that are the best for them and their families.