Capitol Hill lawmakers are advancing legislation to broaden the options small business owners have to offer affordable health care coverage to their employees.
H.R. 3799, the CHOICE Arrangement Act, sponsored by Rep. Kevin Hern (R-OK), was approved by the House of Representatives on June 21 on a 220 to 209 vote and was sent to the Senate.
Broadens Employees’ Choices
Hern’s bill would codify two rules issued during the Trump administration.
One rule, from 2019, offers employers a tax credit on contributions they make to employees toward purchasing their own health insurance plans on individual markets. These Individual Coverage Health Insurance Arrangements (ICHIAs), now called CHOICE accounts, would no longer limit employers to a select number of plans for their workforce but will empower employees to choose plans suited to their needs with funds provided by their employers.
The second Trump-era rule, dating from 2018, enables small businesses to join forces and receive the same benefits as those enjoyed by large companies.
“We’ve heard that 87 percent of small businesses say they want another way to provide health insurance for their employees without offering a traditional group plan, and 90 percent of individuals want to be able to take their health insurance with them if they change jobs,” Rep. Jason Smith (R-MO), chairman of the House Ways and Means Committee, said in a June 20 statement on the bill.
Businesses Don’t Know Options
In hearings leading up to the CHOICE Arrangements Act, it was revealed that only 30 percent of small businesses with fewer than 50 employees offer health insurance, down from 50 percent 20 years ago.
“Importantly, 70 percent of small businesses do not know that the federal government already allows for flexible health insurance coverage opportunities that could be beneficial to them and their employees—this includes CHOICE Arrangements, Qualified Small Employer Health Reimbursement Arrangements, and the Small Business Health Care Tax Credit,” said Smith.
A provision inserted into the bill by Rep. Claudia Tenney (R-NY) requires the Treasury Department to notify small businesses of the various tax-advantaged coverage options available to them.
H.R. 3799 also contains a provision to offer more flexibility in the definition of “association,” for the purposes of Association Health Plans (AHP), as well as a provision defining financial protection for small businesses opting for self-insurance. AHPs were a focus of Trump administration health policy, but they have faced legal hurdles in court, and enhanced regulation under the Affordable Care Act.
‘Virtuous Cycle’
Expanding the options of both employers and employees would create incentives that will improve health care coverage for millions of Americans, says Daniel Perrin, president of the Washington, D.C.-based HSA Coalition.
“ICHRA-compatible plans are only those compliant with the Affordable Care Act and sold in the individual market,” Perrin told Health Care News. “They receive the same tax benefits as traditional group plans, meaning premiums are exempt from federal income or payroll taxes. ICHRA’s anticipated impact on the individual market is substantial, catalyzing a virtuous cycle that can draw more insurers, induce competition, create an attractive market, and increase enrollment numbers, all without additional government spending.”
Perrin says the Choice Act addresses a concern brought up often in the health care debate: the uninsured.
“The Treasury Department predicted in 2019 that, by 2025, about 11 million people would be enrolled in the individual market using an ICHRA, approximately 100,000 of whom would otherwise be uninsured,” said Perrin.
“The CHOICE Arrangement Act represents a significant step toward expanding coverage and providing more choice in health care,” said Perrin. “It would greatly contribute to a more inclusive, accessible, and diverse health care market.”
Employers, Employees Would Benefit
Brian Blase, president of the Paragon Health Institute, welcomes the effort to give both employers and employees more choices in the health care arena.
“ICHRAs permit employers to provide tax-free contributions that employees can use to buy coverage that is best for them and their families,” said Blase. “While reforms to the individual market to make such plans more attractive are important, ICHRAs represent an important step to giving Americans more control over their health care and help more employers offer health benefits.”
Obamacare Compliant
The CHOICE Arrangement Act comes up short, says John C. Goodman, president of the Goodman Institute for Policy Research and co-publisher of Health Care News.
“Personal and portable insurance is extremely popular with voters. It’s long overdue,” said Goodman. “But like the Trump executive order and the rule on which it is based, there is a hidden catch in the Choice Act. The insurance must be Obamacare compliant. That means employees can only use their employer’s money to purchase insurance sold in the (Obamacare) exchanges.
The lack of flexibility in contributions to, and coverage under, such plans has limited their appeal, says Goodman.
“Unfortunately, the insurance sold in the exchanges has higher premiums, higher deductibles, and narrower networks than most group insurance. That means the opportunity won’t be exploited in most places most of the time,” said Goodman.
Bonner Russell Cohen, Ph.D. (bcohen@nationalcenter.org) is a senior fellow at the National Center for Public Policy Research.
