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BACKGROUND PRESS CALL
BY SENIOR ADMINISTRATION OFFICIALS
ON THE TRUMP ADMINISTRATION’S HEALTH REIMBURSEMENT ARRANGEMENT (HRA) RULE
Via Teleconference
4:36 P.M. EDT
MS. BURRIS: Hi, everyone. Thanks for joining the call today. My name is Meghan Burris. I'm the Director of Media Affairs here at the White House.
With me, I have Joe Grogan, Assistant to the President and Director of the Domestic Policy Council here at the White House, as well as Brian Blase, Special Assistant to the President for the National Economic Council.
Brian and Joe are going to walk you through today's Health Reimbursement Arrangement rule that should be posted to the Federal Register right now. And, with that, I will pass it over to Joe Grogan, who's going to take the lead on the call.
Everything that you hear on the call is on the record. And, unfortunately, at this time, we're sort of limited on timing, so we won't be able to take questions at the end of the call. But you guys should all have my information; my colleague, Weston Loyd's information; and Austin Cantrell's information. If you have any additional follow-up questions, please shoot us a note or give us a call.
And, with that, I will pass it over to Joe Grogan.
MR. GROGAN: Thanks, Meghan.
The President is committed to providing Americans with better healthcare options at lower cost. Today’s regulatory action finalizes the Health Reimbursement Arrangement (HRA) rule that the Departments of Treasury, Labor, and Health and Human Services first proposed in October 2018. Today’s rule creates two new HRAs -- an individual coverage HRA and an excepted benefit HRA.
Brian Blase with the National Economic Council is going to explain key aspects of the rule and the benefits of this action, but here is the main takeaway: The rule will provide hundreds of thousands of businesses a better way to offer health insurance coverage and millions of workers and their families a better way to obtain coverage.
Using an individual coverage HRA, employers will be able to provide their workers and their workers’ families with tax-preferred funds to pay all or a portion of the cost of coverage that workers purchase in the individual market.
The departments estimate that once employers fully adjust to the new rules, roughly 800,000 employers will offer individual coverage HRAs to pay for insurance for more than 11 million employees and their family members, providing these Americans with more options for selecting health insurance coverage that better meets their needs.
Of the 800,000 employers we expect to offer an individual coverage HRA, almost 90 percent will have fewer than 20 workers.
The Obama administration issued a rule that prohibited employers from reimbursing employees’ individual market premiums. This misguided action restricted employer flexibility and employee choice, and today’s rule undoes that and goes even further.
It's the result of a very deliberate and thoughtful policy process, including a 60-day period of robust public comment. It balances employer flexibility with commonsense guardrails to mitigate adverse selection in the individual market.
Today's rule builds on previous administration actions that expanded consumers’ ability to purchase more affordable coverage.
In October -- on October 12, 2017, the President issued Executive Order 13813, “Promoting Healthcare Choice and Competition Across the United States.” This order spurred the expansion of HRAs, Association Health Plans, and short-term, limited-duration insurance, and led to the administration’s comprehensive report, "Reforming America’s Healthcare System Through Choice and Competition."
And just to put a fine point on it, this is the end and culmination of that executive order, and closes out all the actions called for when President Trump signed the executive order.
In June 2018, the administration finalized a rule to open another pathway for businesses, including many sole proprietorships, to join together to obtain more affordable coverage for themselves and their families through Association Health Plans.
This rule supported the flexibility of businesses to offer flexible plans of insurance for their employees. It is currently under review in the courts, but the administration continues to work toward the goal of providing businesses access to AHPs.
In August 2018, the administration finalized a rule to expand consumers’ ability to purchase short-term plans, which is a much more affordable option for millions of Americans, including many who are unable to obtain other affordable coverage.
The Council of Economic Advisers has estimated that Americans will receive $453 billion of net economic benefit over the next decade from the elimination of the individual mandate penalty combined with the expansion of AHPs and short-term, limited duration plans.
Now, I'll let Brian Blase get into a few more details.
MR. BLASE: Thanks, Joe.
Like you said, this rule is primarily about increasing employer flexibility and worker choice of coverage. As you mentioned, we expect this rule to particularly benefit smaller employers and make it easier for them to compete with larger businesses by creating another option for financing worker health insurance coverage. Businesses and workers can take advantage of these new rules starting January 1, 2020.
Many small employers struggle to offer coverage to their employees, and a significant number of small employers have stopped offering coverage since 2010.
The rule enables these businesses to better focus on serving their customers and growing their businesses, and not on navigating and managing complex health benefit design.
The HRA rule will significantly increase the number of Americans with private insurance coverage and will reduce the number of uninsured.
For firms that employ 3 to 24 workers, the percentage of workers covered by employer health benefits fell from 44 percent in 2010 to 30 percent in 2018. For firms that employ 25 to 49 workers, the percentage of workers covered by employer health benefits fell from 59 percent in 2010 to 44 percent in 2018. We expect this rule will reverse those trends.
The departments estimate that, once fully phased in, about 800,000 more people will have health insurance overall as a result of this rule.
The HRA rule significantly increases workers’ choice of coverage, increases the portability of that coverage, and will generally improve worker economic well-being.
Eighty-one percent of small to midsized employers, those with fewer than 200 employees; and 42 percent of large employers, those with at least 200 employees, offering health coverage in 2018 provided only one type of health plan to their employees.
By increasing choice and empowering more people to shop for health plans in the individual market, the final HRA rule should spur a more competitive individual market that drives health insurers to deliver better coverage options to consumers.
Economic research shows that employees value choice. A 2013 article in the American Economic Journal estimated the median welfare gain of additional insurance options for employees at 13 percent of premiums.
The HRA rule corrects a major distortion that favors traditional employer-sponsored group health plans over other types of financing arrangements.
In effect, the HRA rule offers the ability for HRAs to reimburse individual market premiums and obtain the tax advantage traditional employer-sponsored group health plans enjoy: the exclusion of the premiums from federal income and payroll taxes.
The HRA rule strikes the right balance between employer flexibility and guardrails meant to protect the individual market against adverse selection. Thus the HRA rule should significantly increase the size of the individual market, making it a more attractive option for insurers to enter and offer coverage. We estimate the number of individual market participants will eventually grow by about 50 percent.
To prevent potential adverse selection, the rule provides that employers may either offer an individual coverage HRA or a traditional group health plan within an employee class, but may not offer employees a choice between the two.
To prevent potential adverse selection, employers that offer an individual coverage HRA must do so on the same terms for all employees in a class of employees, except that they may increase the HRA amount for older workers and for workers with more dependents.
Employers have the flexibility to offer an individual coverage HRA on a class-by-class basis and to create classes of employees around certain employment distinctions, such as salaried workers versus hourly workers, full-time workers versus part-time workers, and workers in certain geographic areas.
Employers have the flexibility to maintain their traditional group health plan for existing enrollees, with new hires offered an individual coverage HRA.
The rule also includes a disclosure provision to help ensure that employees understand the type of HRA being offered by their employer and how the HRA offer may affect their eligibility for the premium tax credit.
In addition to allowing individual coverage HRAs, the HRA rule creates an excepted benefit HRA. In general, this aspect of the rule permits employers that offer traditional group health plans to provide an HRA of up to $1,800 per year -- indexed to inflation after 2020 -- to reimburse an employee for certain qualified medical expenses, including premiums for short-term plans. This HRA could available even if the employee doesn’t enroll in the traditional group health plan. This provision could benefit employees who have been opting out of their employer’s traditional group health plan because the employee share of premiums has become too expensive.
In 2018, 27 percent of workers eligible for employer coverage at small and midsized firms -- again, those with fewer than 200 workers -- turned down the offer of employer coverage.
Finally, the HRA rule has the potential to reduce healthcare spending, particularly less efficient spending, and ultimately result in higher wages for workers in firms that currently offer traditional group health plans, as well as the potential for higher economic growth.
The rule will make the cost of coverage more visible for some employees, which should, over time, put downward pressure on insurance costs and lead employers to offer higher wages.
The rule allows employers to offer compensation arrangements that many workers will prefer, meaning that the rule should, over time, boost the labor supply and the overall economy.
As Joe mentioned, this is the final action in the -- from the October 2017 executive order that the President signed on injecting choice and competition into insurance markets. It's going to cause significant benefits to employers, particularly small employers, and millions of workers. And the administration is incredibly excited about this opportunity. Thanks.
MS. BURRIS: Thanks, Brian. Thanks, Joe. Again, unfortunately we're not able to take questions at this time. Our apologies on our end. We're a little tight on time. If you have any follow-up questions, please feel free to email me. My email is Meghan.k.burris@who.eop.gov. And my colleague, Weston Loyd, his email is a little bit easier -- it's just Weston@who.eop.gov.
Again, everything you heard on the call today is attributable, on the record, to either Joe Grogan or Brian Blase.
And, again, thank you for your time. We appreciate you being on the call today. Thanks.
END 4:48 P.M. EDT
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