New health options for small business employees
New health options for small business employees
As we travel across the country talking to owners of small businesses and American workers, we have constantly heard that health insurance is unaffordable and that workers need more options. The data supports your concerns. As insurance costs have increased since 2010, the proportion of workers in companies with between 3 and 24 workers covered by employer health benefits has decreased from 44% to 30%. For companies that employ 25 to 49 workers, the proportion of workers covered by the employer's health benefits has decreased from 59% to 44%.
Small businesses that continue to offer coverage to their workers usually only have one plan available. In fact, 81% of small employers offering health benefits (those with less than 200 employees), and even 42% of large employers, offer only one option for their employees.
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Last year, President Trump signed an executive order that tells us to consider steps to expand consumer choice and increase opportunities for companies that want to offer health benefits to their employees. The president was right, the status quo is unacceptable. In recent decades, the rising cost of health care has consumed the disposable income of American families and the ability of employers to expand their businesses and create jobs. ObamaCare rules and mandates made the problem worse by increasing premiums and reducing consumer choices.
Americans should have more options than a plan that their employer selects for them. And they should be able to keep their insurance when they change employers or leave the labor market to raise a family or care for a sick loved one.
That's why the administration is proposing a regulation that would create a new way for employers to provide health coverage for employees. This proposal would give millions of workers and their families more control over their medical care. It also has the promise of more efficient health care spending, broader business growth and higher wages.
The proposed regulation seeks to achieve this by expanding the Health Reimbursement Agreements. HRAs offer refunds funded by the employer, which employees can use for health care expenses. Reimbursements under an HRA do not count as taxable income.
First, we would allow employers to offer HRAs to reimburse employees for health insurance purchased in the individual market, which allows employers to make a contribution as significant as they would have done for the premiums of a traditional plan sponsored by the employer. employer.
Second, we would allow employers offering a traditional group plan to offer an HRA of up to $ 1,800 a year to reimburse an employee for certain qualified medical expenses, such as independent dental benefits.
Employers maintain considerable control over health insurance in part because of the tax benefit Washington provides for employer-sponsored insurance. The health coverage premiums paid by both the employer and the employee are exempt from income and payroll taxes.
The new rule does not change the traditional tax benefit for employer-sponsored insurance. Instead, it provides an alternative way for employers to use this benefit for their employees. Instead of an employer choosing the plan, employers may choose to make contributions that allow employees to choose a plan that works for them and their families.
In 2013, the Obama administration prohibited employers from using HRA or any other similar agreement to reimburse employees' premiums for individual market coverage. That closed an option that many employers had used to help employees get coverage. Small and medium enterprises were more likely to use this approach because they did not have the capacity or resources to administer a health insurance plan.
The Obama administration feared that some employers would segregate their workers, staying healthy in the employer's traditional group plan and encouraging the sickest employees to buy individual market coverage. We recognize this as a potential problem. Damaging the individual market, already undermined by ObamaCare, would make this rule ineffective, since employees would not have attractive coverage options in the individual market. But closing the reimbursement of individual market premiums by employers went too far and hurt too many employers and workers. Instead, we propose carefully constructed handrails to protect the individual market.
Initial estimates from the Treasury Department suggest that in the next 10 years, 10 million employees will have insurance through these HRAs, distributed among approximately 800,000 employers.
Some experts, such as Regina Herzlinger of Harvard Business School, suggest that the effect could be even greater, since expanded HRAs have the potential to create a more efficient health care system by unleashing competition among consumers. That could lead to greater investment in the workforce and higher wages, as it spends less on insurance, and could stimulate innovation between providers and insurers, as they compete directly for consumer dollars.
This kind of bold vision for a consumer-driven insurance market is part of President Trump's plan to offer Americans better health care at a lower cost. The new proposed regulation seeks to allow many more American workers to choose from a wider range of health insurance options, while companies that create jobs can focus on doing what they do best: serving their clients, not navigating and managing complex health benefits designs
Messrs Acosta, Mnuchin and Azar are, respectively, secretaries of work, treasury, health and human services.
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