At the very end of the 996-page 21st Century Cures Act, buried behind sweeping legislation to speed up cures for cancer and fight the opioid crisis, is a little provision that could drive enrollment in the individual insurance market and possibly, balance out the imperiled health insurance exchanges.
The Cures Act includes provisions of the Small Business Healthcare Relief Act that allow businesses with fewer than 50 employees to reimburse their workers for out-of-pocket healthcare costs and premiums on the individual market.
Under the Affordable Care Act, small employers aren't required to offer health insurance plans to their employees, but many of them want to because it helps attract and retain good workers. In 2015, about 30% of businesses with fewer than 50 employees offered health coverage, according to the Kaiser Family Foundation. That number is steadily declining, however.
Essentially, the Cures Act reinstates one way for small businesses to finance employees’ health insurance that was prohibited by the IRS in 2013 because it didn’t comply with new rules governing group health plans under the ACA.
Some say that allowing small businesses to subsidize employees’ individual health plans through HRAs will prompt more people to get coverage through the individual market.
The provision “will help small businesses pay for their employees to get coverage, and importantly it will put more employed individuals into the individual market to try to stabilize it,” said Jeff Bakke, health strategy officer at Wex Health, a technology company that manages account-based plans for employers.
At the same time, it could mean fewer small businesses will provide health insurance through the small group insurance market, which has been struggling and lost significant enrollment in the past few years.
“One way of thinking about it is if it’s good for one (market), it’s going to be bad for the other,” said Erin Trish, a health policy professor at the University of Southern California.
Some small businesses that offer coverage through the small group market could now switch over to offering standalone HRAs. And some that don’t offer a health plan could find that the HRAs are a good way to contribute something toward employees’ health expenses.
But will the Small Business Healthcare Relief Act help stabilize the individual market, which will see premiums rise by double digits on average in 2017?
Trish said the new leeway is likely to increase enrollment in the individual market, but it remains to be seen whether those new enrollees will be healthier or sicker than those already enrolled in the individual market.
If they are healthier, that could help balance out a population that has been sicker and older than average, causing health insurance premiums to rise. But if the new enrollees are sicker, that could drag down average premiums for everyone, she said.
“There is also a concern that small employers with older or sicker employees might disproportionately move them to the individual market, further destabilizing those markets,” Tim Jost, law professor at St. Louis University and ACA expert, wrote in a recent blog post.
Because the ACA and the health insurance exchanges are on the verge of being dismantled by Republican lawmakers, there’s a chance that employees who enroll in exchange coverage could end up losing it shortly after along with 20 million others.
But experts have urged people to sign up for health insurance on the ACA exchanges despite what the future may hold. “Much of the talk out of D.C. these days is that if the ACA is repealed there will be a transition period during which the ACA would stay in place, so that the administration and Congress have time to craft a detailed replacement plan. That would leave the current framework in place,” said Chris Byrd, executive vice president at Wex Health, which helped draft the bill.
“Even in a replace scenario, the health of the individual market is important for the millions who don't have health insurance available through their employer or Medicare or Medicaid,” he added.
Before 2013, small businesses had long been providing HRAs to employees. The account-based plans allow employers to contribute pre-tax dollars to pay for employees' medical care and other health services. They were a great option for smaller employers—many of which couldn't afford to offer coverage with the minimum benefits required under the ACA—to still contribute something to their workers' healthcare, which helped them attract and keep talented employees.
But federal agencies in 2013 ruled that small businesses could no longer offer stand-alone arrangements under the ACA. If they did, they'd face heavy financial penalties. The Obama administration was concerned that if stand-alone HRAs were allowed, more small employers would choose to dump their health plans and instead send employees to the insurance exchanges, which would be easier and cheaper than providing employer-sponsored insurance.
That largely didn't happen, and employers overwhelmingly kept offering health insurance.
The health insurance exchanges, meanwhile, have struggled with low enrollment, reaching 12.7 million for 2016. So far, enrollment for 2017 is on par with last year.
The bipartisan Small Business Healthcare Relief Act was tucked into the Cures Act in October. The Joint Committee on Taxation found that enacting the bill would have no impact on the federal budget deficit for the next 10 years.
