Making Health Insurance Portable

 

When you leave one job for another, you can take your 401K plan with you. Why can’t you do that with your health insurance?

The simple answer is ObamaCare. The architects of ObamaCare didn’t want you to be able to do that.

Before ObamaCare, there were accounts called a Health Reimbursement Arrangement (HRA), which were established by employers to enable employees to buy their own health insurance. These funds were not taxed as income to the employee, just as employer-provided insurance isn’t taxed.

John C. Goodman, writing in Forbes, says these HRAs were not widely used, however, because many insurance agents were fearful that if they knew the policies they sold were being purchased with employer money, they might be penalized.

Then came ObamaCare. The Obama administration so hated this idea that they created the highest penalty in the bill for those employers caught giving their employees pre-tax dollars to purchase their own coverage. The penalty is $100 per day per employee, or $36,500 a year!

Fortunately, the Trump administration is eliminating this penalty. Beginning next January, employers will be able to use HRAs to help employees obtain their own coverage with the administration’s blessing. What a difference a change of presidents can make.

It has always been unfair that health insurance purchased through an employer is not taxed but the same insurance purchased as an individual is taxable. HRAs is one way to get around this inequality. The pre-tax dollars of the HRA account can be spent at the discretion of the employee on the health insurance of their choice – and they can take this account with them if they change employers.

Declining Private Insurance

You may be surprised to know that the number of Americans with private health insurance has gone down under ObamaCare. This despite huge federal subsidies for those who purchase their insurance on the ObamaCare exchange, and an Employer Mandate requiring all employers with more than 50 employees to purchase health insurance.

Small businesses of 3 – 24 employees fell from 44% in 2010 to 30% in 2018. Larger businesses of 24-29 workers fell from 59% to 44%. Even in firms with up to 199 workers, 27% refuse to accept their employer’s offer of health insurance. This is probably because the ObamaCare mandates have made all insurance more expensive with higher deductibles and co-pays even if the employer pays for the premium.

Another Trump administration change is addressing this problem. Employers are allowed to deposit up to $1,800 per year in an “excepted benefit HRA” and these funds can be used to purchase short-term, limited duration (STLD) insurance. This insurance is exempt from ObamaCare regulations, making it far more affordable. These plans were only available under Obama a maximum of three months, but Trump has made them extendable up to three years.

Goodman says these changes are important in the short run but better long-term solutions are needed, such as the Sessions – Cassidy plan. Republicans should be campaigning on these reform successes now and promoting permanent solutions for the future.