A HUGE WIN FOR THE LABOR MARKET AND A STEP TOWARDS ENDING JOB-LOCK!
This is one of the most positive and substantive changes in healthcare policy to come out of Washington, D.C. in the past 40 years. It finally pierces the veil of separation between the Group Market & the Individual Market, helping to dissolve the perverse tax incentive which ties health insurance to employment. ~ Forum for Healthcare Freedom
“Starting on January 1, 2020, employers will be able to offer their workers HRAs to buy individual market coverage for themselves and their families. The administration’s new rule addresses a major inequity by, in effect, providing the same tax advantage that traditional employer-sponsored group plans receive — exclusion of premiums from federal income or payroll taxes — to coverage that workers in the individual market purchase from an HRA.
The rule will significantly expand worker options since 80% of firms that provide insurance currently offer only one type of plan. Now, workers will be able to use tax-advantaged money from their employers to buy coverage of their choosing. This new flexibility will allow people to maintain their coverage when they switch jobs.
In particular, this new rule should help small business workers by making it possible for employers to fund coverage with less hassle and cost than maintaining a traditional group health plan. Between 2010 and 2018, the proportion of workers at firms with three to 49 workers covered by an employer plan fell by more than 25%. This rule should help reverse that decline. The rule also makes it easier for small businesses to compete with larger businesses for talent.
It will take roughly five years for the full impact of the rule to hit — at which point, we expect 11 million workers and family members to use HRA funds to obtain individual coverage. The HRA rule may increase the size of the individual market by upwards of 50%, and should spur a more competitive market that drives insurers to deliver better options to consumers.”