New Rules Shake Up Employer Health Insurance

The Trump administration is rolling out rules that will allow employers to fund Health Reimbursement Arrangements (HRAs) so that their employees can purchase health insurance on their own. The rules, which take effect on Jan. 1, 2020, are currently being finalized by the departments of Treasury, Labor and Health and Human Services. The rules follow on the heels of President Trump's October 2017 Executive Order 13812, "Promoting Healthcare Choice and Competition Across the United States." HRAs will be funded entirely by employers without requiring employee contributions. The funds in the HRAs will accrue to the employees and their family members tax-free. The White House expects 800,000 employers to choose this defined benefit contribution option, which is expected to affect 11 million employees and their families. The Department of Labor (DOL) intends to publish its final rule in the Federal Register on June 20. In announcing the publication, the DOL wrote:

An HRA is a type of account-based group health plan funded solely by employer contributions (with no salary reduction contributions or other contributions by employees) that reimburses an employee solely for medical care expenses incurred by the employee, or the employee’s spouse, dependents, and children who, as of the end of the taxable year, have not attained age 27, up to a maximum dollar amount for a coverage period.2 The reimbursements under these types of arrangements are excludable from the employee’s income and wages for federal income tax and employment tax purposes.

Trump himself promoted the new approach to employer-based health insurance in remarks in the Rose Garden on Friday, June 14: "HRAs will allow American workers to shop for the plan that's right for them and their family, and have their employer cover the cost. HRAs will now receive the same tax treatment that other employer-provided health plans have always enjoyed. Then on Sunday night in an interview on ABC-TV, the president promised to introduce a plan for "insurance for everybody" in "about two months."