Allowing HRAs for Short-Term Health Plans Would Undermine Markets, Insurers Say

The health insurance industry cautioned the Trump administration against allowing health reimbursement accounts (HRAs) to be used to purchase short-term limited duration health plans (STLDHPs), in comments submitted regarding a proposed rule change.

Both America’s Health Insurance Plans (AHIP) and the Blue Cross Blue Shield Association (BSBCA) said that the change would allow unbalanced risk pools, as healthier employees might opt for a combination of an HRA integrated with a short-term plan. Such a change would cause negative effects through the insurance industry nationwide, they said.

Comments to the administration on the proposed rule, announced in October 2018, were due last Friday.

AHIP and BCBSA said that the administration should protect nondiscrimination “guardrails” by requiring individuals participating in an HRA to continue to be enrolled in comprehensive individual health insurance or through group coverage offered by an employer.

“Permitting HRAs to be integrated with STLDI [short-term limited duration insurance] would open the door to employers replacing coverage that is prohibited from discriminating based on pre-existing conditions with coverage that may charge more for pre-existing conditions or deny enrollment outright. It could also lead to significant increases in individual market insurance premiums in states where a significant number of employees are offered Integrated HRAs by their employer,” said the AHIP letter. “In cases where an employer offers the Integrated HRA option, if the HRA can be used to purchase STLDI, employees without costly health conditions may disproportionately choose STLDI, and employees with high cost health conditions would likely disproportionately enroll in the individual market. This will increase premiums in the individual market for everyone, increase taxpayer spending on premium tax credits, and put the cost of coverage further out of reach for individuals who do not qualify for premium subsidies.”

The Trump administration expanded the use of STLDHPs last year. The plans are allowed to charge more for patients with pre-existing conditions and are not compliant with the essential health benefits mandated by the Affordable Care Act (ACA), such as prescription drug coverage, or the ACA’s ban on excluding coverage for certain conditions, such as cancer care.

There are concerns that some of the changes could cause employers with a sicker workforce to take steps to encourage them to enroll in the individual market, causing premiums in that market to rise due to adverse selection.

In its letter, the BCBSA cited an example of a company which offers to pay the premium a worker would purchase for a health policy on his or her own through the marketplace exchanges set up by the ACA. The company targets the offering to workers whose health costs are expected to reach $50,000 per year or more. The employer pays the premium and out-of-pocket costs and, in addition, would deposit the maximum $1800 allowed into the employer’s HRA.

On Friday, the Brookings Institution released an analysis of what would happen if the administration relaxed some some of these guardrails.

Currently, employers are barred from offering an HRA side-by-side with comprehensive health insurance. In addition, employers are required to offer an HRA to all employees in the same rating class.

Brooking said that if those 2 provisions were removed by the administration, and if HRAs were allowed to pay for STLDHPs, premiums in the individual market would rise by at least 16%, depending on how many employers shifted their high-cost workers into ACA plans. That 16% estimate comes from what Brookings called a “conservative scenario” in which only 10% of employers shifted workers onto the exchange.

“If all employers took this approach, individual market premiums would almost double,” the report said.