Trump Administration expands HRAs

June 20, 2019

by John McClaughry

Two weeks ago the Trump administration finalized a rule to expand the use of tax free Health Reimbursement Arrangements (HRAs).

Up to now, an employer-financed HRA could be used to cover deductibles, copays, dental, vision care, and many other health related expenses, but not the cost of health insurance. HRA funds are tax free to both the employer and employee and the funds roll over year to year.

This new rule will allow employers to offer HRAs to their employees to purchase insurance as an alternative to employer provided coverage.

More than 80 percent of employers currently offer their workers just one health insurance choice. With the new rule, employers can fund an employee’s HRA that can be used to buy a different policy more suitable to the employee’s needs.

Last year the administration released a rule that gave workers important flexibility to use short-term, limited-duration health insurance plans by allowing families and individuals to purchase plans for 12 months with a total of 36 months of renewability.

These plans are exempt from Obamacare’s costly mandates and regulations, meaning more Americans will have access to affordable and flexible healthcare. As a result, these plans are expected to be 50 to 80 percent cheaper, and will offer millions of Americans flexible care.

President Obama told Congress his guiding principle was competition and choice, but that simply wasn’t true. President Trump’s new rule partially fulfills Obama’s empty promise.

John McClaughry is vice president of the Ethan Allen Institute. 

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