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Affordable Care Act

Trump’s new health care plan, health reimbursement arrangements, explained


(Vox) – President Trump long ago gave up on his promise to deliver “health care for everybody,” but his administration does have something else in mind: health reimbursement arrangements.

The Trump administration finalized some new regulations late last week for those tax-preferred accounts. In short, employers can pay money into their employees’ health reimbursement accounts, and then the workers can take that money and use it to buy insurance on the individual market. Companies can alternatively pay into a different kind of HRA that their workers can then use to pay directly for health care or for a “short-term limited duration” insurance plan that does not have to comply with Obamacare’s rules about preexisting conditions.

The regulations do put some important standards in place. For example, employers can’t pick and choose individual workers to provide HRA money to, and they cannot offer the same employees both a traditional employer-sponsored insurance plan and an HRA. But health care policy experts still expect a negative effect on the individual markets set up by the Affordable Care Act.

That’s because employers in states where individual coverage is currently available relatively cheaply will have a stronger incentive, particularly if they have a sicker workforce, to offer HRAs. They can spend less on an HRA than they would on offering insurance plans. But if those companies funnel their sicker workers into the ACA markets, then premiums for the Obamacare coverage are going to increase.

“Potential disadvantages, as always with insurance, involve the potential for gaming,” Katherine Hempstead, senior policy adviser at the Robert Wood Johnson Foundation, told me. “If employers are able to use this to dump expensive employees in the individual market, they would save money but the individual market could become unaffordable.”

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