The rule deals with health reimbursement arrangements (HRA), which allow employers to offer employees a fixed, tax-preferred sum that employees can put toward their individual health care plan.
Of the 800,000 employers expected to take advantage of HRAs, almost 90 percent will have fewer than 20 workers, Joe Grogan, assistant to the president and director of the White House Domestic Policy Council, told reporters in a call.
Under the rule, employees who pay for their own health insurance plans will get similar tax benefits as those who are part of a company-sponsored group plan, such as exemptions for premiums from federal income and payroll taxes.
The rule could also benefit employees who don’t want their employer-sponsored plan, or who wish to move to a better plan on the individual marketplace, thus expanding their options.
The HRAs require the employee—and depending on the employer, family members as well—to already have an individual health care plan, either through the state or federally run marketplaces or directly from the insurance company.
The amount offered to employees for traditional HRAs can vary by age and the number of dependents a person has, and will be offered to all employees of a certain class, such as all salaried workers. This means employers won’t be allowed to cherry-pick which employees get HRAs and which get employer-sponsored health care plans, so as to prevent them from only offering sicker employees HRAs while offering healthier employees group coverage.
Trump called the rule “a monumental victory for small businesses, for their workers, and previously uninsured Americans.”
The rule goes into effect on Jan. 1, 2020.
The rule is part of the Trump administration’s efforts to give individuals more say over their own health care and, at the same time, put pressure on medical providers to lower their prices.
“The rule will make the cost of coverage more visible for some employees, which should, over time, put downward pressure on insurance costs and lead employers to offer higher wages,” Brian Blase, special assistant to the president for the National Economic Council, told reporters.