Health insurance portability could be enshrined in federal law with Republican control of the U.S. House of Representatives and Sen. Bill Cassidy (R-LA) as ranking member of the Senate Health, Education, Labor, and Pensions (HELP) Committee.
“Portability” means each employee owns their insurance plan and can take it with them if they leave their job. Rules implemented by President Trump in 2019 expanded a type of portable insurance known formally as Individual Coverage Health Reimbursement Arrangements (ICHRAs). ICHRAs give employers an alternative to manage the rising cost of health coverage for employees.
Enjoys Bipartisan Support
Cassidy and U.S. Rep. Pete Sessions (R-TX) introduced a bill that would codify portable insurance in federal law and replace Obamacare, in 2016, and Sessions could re-introduce the “Health Care Equality and Modernization Act of 2022,” a version of the earlier legislation.
There is support in both parties for portable health insurance, says Paragon Health Institute President Brian Blase.
“ICHRAs permit employers a simpler and likely more cost-effective way to offer health insurance to their employees while expanding employees’ coverage options,” said Blase. “Many entrepreneurial and innovative companies are working to make this option as attractive as possible for employers and employees. The bipartisan nature of ICHRAs means that the policy is likely enduring.”
The 21st Century Cures Act in 2016, for example, had the support of then-Vice President Joe Biden. The bill established qualified small employer HRAs, the precursor to the ICHRAs. The Biden administration has rolled back several Trump executive orders but has left ICHRAs alone, despite the urging of left-leaning health care activists.
Employee Tax Benefit
An ICHRA allows employers to reimburse the cost of plans employees choose, with certain restrictions, and relieves employers of the paperwork burdens and annual negotiations with health insurers typical of traditional employer-provided group coverage.
ICHRAs are a non-taxed benefit, like traditional employer-sponsored group health plans, and can be offered on the Obamacare Marketplace, according to the U.S. Department of Health and Human Services (HHS) website, healthcare.gov.
“It’s a specific account-based health plan that allows employers to provide defined non-taxed reimbursements to employees for qualified medical expenses, including monthly premiums and out-of-pocket costs, like copayments and deductibles,” states the HHS.
People with ICHRAs must have a health insurance plan that complies with the Affordable Care Act (ACA), or Obamacare, like the policies offered through the federal health insurance exchange, according to the HHS.
“Employees must be enrolled in individual health insurance coverage (like a plan they bought through the Marketplace) to use the funds,” states the HHS.
Employees choose among plans offered by a qualified ICHRA administrator. Plans can differ in premium cost, deductibles, copayments, and the network of doctors offered.
Popularity Increasing
A survey of 455 U.S. employers by insurance consultants Willis Towers Watson (WTW) found 67 percent plan to prioritize controlling health care costs over the next three years.
Health care consultancy Avalere projects uptake of ICHRAs will increase throughout 2023, including 10 percent of firms that don’t currently offer benefits (up from 7 percent in 2021) and 7 percent of firms that do (up from 4 percent).
Given the advantages ICHRAs offer both employers and employees, it might surprise some people that the plans haven’t caught on faster, wrote small business analyst Gene Marks on Medium on November 8.
“Many small businesses are still unaware of their existence and let’s face it: it’s not as if the insurance companies or their brokers are breaking down the doors to get the word out, given that many will wind up paying so much less,” said Marks.
Inflation Could Be Catalyst
In 2019, the Department of Treasury projected that 800,000 businesses would offer ICHRAs to over 11 million employees during the next five to 10 years.
As employers, particularly owners of small businesses, try to cope with the pressures of inflation and labor shortages that escalated in 2020, they may give ICHRAs a serious second look.
One threat to ICHRAs could come from the Biden administration, which is reversing many Trump-era policies through the administrative rulemaking process. The Trump administration favored patient choice while the Biden White House seeks a larger role for the government in health care coverage. Undoing the rule, or sharply limiting ICHRAs, would require joint rulemaking by HHS, the Labor Department, and the Treasury Department.
It is only a matter of time before ICHRAs achieve widespread acceptance, as with Individual Retirement Accounts (IRAs) and investment-based, employer-sponsored retirement plans, says Doug Badger, a senior research fellow at The Heritage Foundation Center for Health and Welfare Policy.
“IRAs and 401(k)s were strange and unfamiliar concepts when Congress created them in the 1970s,” said Badger. “By 2019, people held $20.2 trillion in these accounts, more than 60 percent of Americans’ retirement assets, according to the Congressional Research Service.” “ICHRAs seem as strange to many people today as personal retirement accounts once did, but they will grow in popularity as workers benefit.”
Bonner Russell Cohen, Ph.D. (bcohen@nationalcenter.org) is a senior fellow at the National Center for Public Policy Research.
This article was updated on January 11, 2023
