by Mitch Kokai
Senior Political Analyst, John Locke Foundation
The new rule will significantly expand the permitted uses of tax-advantaged health reimbursement accounts, or HRAs.
Today, these special employer-based accounts, in which funds can be rolled over year to year, are used by employees to cover medical expenses, including out-of-pocket costs and services uncovered by traditional insurance.
But with this rule, for the first time in the history of these tax-free accounts, the administration would allow employees to use them to pay premiums for individual health insurance.
This change will not only expand health insurance coverage, but will also lower health care costs. …
… With this regulatory initiative, the Trump administration is making a major change in health care financing.
Employers who do not, or cannot, offer health insurance at the place of work, would henceforth be able to deposit tax-free funds into health reimbursement accounts on behalf of employees who wish to use those funds to buy health insurance plans in the individual insurance markets.
While announcing the final rule, administration officials said they expected that the new rule, within a five-year period, could encourage as many as 800,000 businesses to sponsor health reimbursement accounts to fund individual coverage for more than 11 million workers.
This change is a major component of the Trump administration’s efforts to repair Obamacare’s damage to the badly battered individual and small group health insurance markets.