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The Trump administration has potentially shaken up American health insurance markets by finalizing a new rule allowing employers of all sizes to fund employees' health insurance premiums in the individual market in lieu of offering them access to an employee-sponsored group health plans. They can do this by funding Health Reimbursement Arrangements (HRAs), currently used for medical expenses excluding premiums for individual market plans, to fund individual market premiums to any level they choose -- e.g., to roughly the percentage of premiums they currently contribute to group health plans.
Many healthcare scholars and stakeholders worry that the alternative will be particularly attractive to employers with older, sicker employees, or that large employers will find ways to send sicker employees to the individual market. As a defense against that, the rule stipulates that a given employee group (sliced various ways, e.g., part-time vs. full time) can't be offered a choice between a group health plan and the individual market -- the employer must offer either/or. The rule also suggests (pdf pg 9) that the narrow provider networks prevalent in the individual market would be more attractive to healthier than to sicker populations -- and presumably, such preferences would influence the choices employers offer.
The administration forecasts that over ten years, about 11 million people will access HRAs to enroll in individual market coverage, while the number of people covered in employer-sponsored plans will drop by about 7 million (current ESI enrollment is about 150 million). The impact on the individual market would be major, but on the employer group health market, relatively modest.
But the HRA rule potentially cracks the door for a future Democratic Congress and president to vastly expand access to public insurance within the current Affordable Care Act structure. Suppose the next Congress, enabled by a Democratic president, injects into the ACA marketplace a national public option, paying Medicare rates to providers or some adjusted version of them, and requiring providers who accept Medicare to accept the public option?
The Medicare-X Choice Act of 2019, introduced by Senators Bennet and Kaine, does precisely this (though it does accord HHS some flexibility to narrow networks by using various value-based payment tools). Minus the new HRA rule, its impact on the employer market would be fairly limited (notwithstanding hospital industry alarm bells), since it maintains ACA rules for subsidy eligibility, limiting eligibility to those who lack an offer of affordable insurance from an employer. Compared to other reform plans out there, it's a relatively modest bill -- or was, until the HRA rule was finalized.
With the new HRA rule in effect, however, should Medicare-X or something like it be implemented, employers could fund their employees' enrollment in a public plan with virtually unlimited access to hospitals and doctors. If that plan pays Medicare rates -- about 60% of the rates paid by most commercial insurers -- the cost of funding employees' premiums might be tough to beat.
To be really attractive to employers, Medicare-X might have to change the benchmark plan level from silver to gold. Silver plans in the ACA schema have an actuarial value of 70%, meaning they are designed to cover 70% of the average enrollee's yearly medical costs (though AV "averages" are skewed by the high costs of their sickest members). Gold plans are 80% AV -- closer to employer insurance norms, which are slightly above that. A different Medicare buy-in bill, the Choose Medicare Act introduced by Senators Murphy and Merkley, does raise the ACA benchmark to 80%, though its public option would not pay Medicare rates to providers (its rates are to be negotiated, and capped at the average rates paid by commercial marketplace insurers).
Come to think of it, though, the ACA benchmark, which determines income-based subsidies in the ACA marketplace for those who lack access to employer-sponsored insurance, needn't necessarily determine the level to which employers fund premiums. That is, the HRA funding offer could be keyed to a gold benchmark created by the employer -- for example, funding could equal 80% of a gold plan for individuals, and 70% for family coverage. The cost of gold -- or platinum -- coverage via the public option should be proportionate to the actuarial value (and regulators should make it so). If employers can afford sponsoring 80-85% AV group health coverage, subsidizing 80% or 90% coverage via a strong public option should be even more affordable.
Note that the Medicare-X and Choose Medicare bills both deem their public options "Medicare." In the nomenclature that's become familiar, then, the HRA rule vastly expands the potential reach of a "Medicare buy-in" within the ACA benefit structure.
I've thought for some time that the real sluice gate for a Medicare buy-in to radically transform U.S. healthcare delivery is a buy-in that's open to both employers and employees -- truly open to the latter, by rendering them subsidy-eligible on an income basis regardless of whether the employer offers insurance. (The Medicare for America Act of 2019 would do this, and a good deal more, absorbing Medicaid and current Medicare.) The HRA rule potentially delivers half the loaf. It could make a strong public option very attractive to employers of all sizes. If that's done, how long before the subsidy door is also open to individual employees?
Related
Medicare for all who want it: Potential and pitfalls
Medicare-X 2.0 deserves a second look
The Trump administration has potentially shaken up American health insurance markets by finalizing a new rule allowing employers of all sizes to fund employees' health insurance premiums in the individual market in lieu of offering them access to an employee-sponsored group health plans. They can do this by funding Health Reimbursement Arrangements (HRAs), currently used for medical expenses excluding premiums for individual market plans, to fund individual market premiums to any level they choose -- e.g., to roughly the percentage of premiums they currently contribute to group health plans.
Many healthcare scholars and stakeholders worry that the alternative will be particularly attractive to employers with older, sicker employees, or that large employers will find ways to send sicker employees to the individual market. As a defense against that, the rule stipulates that a given employee group (sliced various ways, e.g., part-time vs. full time) can't be offered a choice between a group health plan and the individual market -- the employer must offer either/or. The rule also suggests (pdf pg 9) that the narrow provider networks prevalent in the individual market would be more attractive to healthier than to sicker populations -- and presumably, such preferences would influence the choices employers offer.
The administration forecasts that over ten years, about 11 million people will access HRAs to enroll in individual market coverage, while the number of people covered in employer-sponsored plans will drop by about 7 million (current ESI enrollment is about 150 million). The impact on the individual market would be major, but on the employer group health market, relatively modest.
But the HRA rule potentially cracks the door for a future Democratic Congress and president to vastly expand access to public insurance within the current Affordable Care Act structure. Suppose the next Congress, enabled by a Democratic president, injects into the ACA marketplace a national public option, paying Medicare rates to providers or some adjusted version of them, and requiring providers who accept Medicare to accept the public option?
The Medicare-X Choice Act of 2019, introduced by Senators Bennet and Kaine, does precisely this (though it does accord HHS some flexibility to narrow networks by using various value-based payment tools). Minus the new HRA rule, its impact on the employer market would be fairly limited (notwithstanding hospital industry alarm bells), since it maintains ACA rules for subsidy eligibility, limiting eligibility to those who lack an offer of affordable insurance from an employer. Compared to other reform plans out there, it's a relatively modest bill -- or was, until the HRA rule was finalized.
With the new HRA rule in effect, however, should Medicare-X or something like it be implemented, employers could fund their employees' enrollment in a public plan with virtually unlimited access to hospitals and doctors. If that plan pays Medicare rates -- about 60% of the rates paid by most commercial insurers -- the cost of funding employees' premiums might be tough to beat.
To be really attractive to employers, Medicare-X might have to change the benchmark plan level from silver to gold. Silver plans in the ACA schema have an actuarial value of 70%, meaning they are designed to cover 70% of the average enrollee's yearly medical costs (though AV "averages" are skewed by the high costs of their sickest members). Gold plans are 80% AV -- closer to employer insurance norms, which are slightly above that. A different Medicare buy-in bill, the Choose Medicare Act introduced by Senators Murphy and Merkley, does raise the ACA benchmark to 80%, though its public option would not pay Medicare rates to providers (its rates are to be negotiated, and capped at the average rates paid by commercial marketplace insurers).
Come to think of it, though, the ACA benchmark, which determines income-based subsidies in the ACA marketplace for those who lack access to employer-sponsored insurance, needn't necessarily determine the level to which employers fund premiums. That is, the HRA funding offer could be keyed to a gold benchmark created by the employer -- for example, funding could equal 80% of a gold plan for individuals, and 70% for family coverage. The cost of gold -- or platinum -- coverage via the public option should be proportionate to the actuarial value (and regulators should make it so). If employers can afford sponsoring 80-85% AV group health coverage, subsidizing 80% or 90% coverage via a strong public option should be even more affordable.
Note that the Medicare-X and Choose Medicare bills both deem their public options "Medicare." In the nomenclature that's become familiar, then, the HRA rule vastly expands the potential reach of a "Medicare buy-in" within the ACA benefit structure.
I've thought for some time that the real sluice gate for a Medicare buy-in to radically transform U.S. healthcare delivery is a buy-in that's open to both employers and employees -- truly open to the latter, by rendering them subsidy-eligible on an income basis regardless of whether the employer offers insurance. (The Medicare for America Act of 2019 would do this, and a good deal more, absorbing Medicaid and current Medicare.) The HRA rule potentially delivers half the loaf. It could make a strong public option very attractive to employers of all sizes. If that's done, how long before the subsidy door is also open to individual employees?
Related
Medicare for all who want it: Potential and pitfalls
Medicare-X 2.0 deserves a second look
Your comments are valuable, but there is a real thicket of complexity to wade through in any combination of employer group and Medicare buy in plans.
ReplyDeleteFor example, will a group insurer terminate coverage if less than 75% of workers are left on the traditional plan? I know some carriers who will.
Can a person of modest income still get a subsidy if their employer helps them buy into Medicare? This is a huge hurdle to overcome.
Many group plans are community rated. The charge is the same no matter what the age of the employee.
Now a 60 year old employee wants to go to the individual market. Does the employer have to wait and find out what premium they get?
I believe that the employer market should largely be left alone. We have virtually all employers with over 50 employees paying premiums voluntarily. Single payer plans have to bring in the same amount of money with taxes, and it will be terribly hard to do.
It does seem odd that an employer who is paying 15% of payroll in health insurance will resist paying a 10% payroll tax, but that does seem to be the political reality.