Referred to as “Cash For Coverage” this regulatory action implements the administration’s 2017 Executive Order and may completely reinvent benefits for American workers.
Effective Jan. 1, 2020, employers, (especially larger employers) will be encouraged to provide truly portable, personally owned benefits to their workers. This will be on the same tax advantaged terms as their previous, limited and costly employer sponsored benefit plans. According to the Administration “42% of larger employers (at least 200 workers) offering health benefits only provide a single coverage option.”
This development is very good news for visionary breakthrough platform companies — like Hixme — already committed to transformation of benefits for large employers. In fact, these companies may well have been prophetic in their commitment to this movement.
Under this new act, here is what is possible:
FOR WORKERS AND FAMILIES:
- Each employer can provide a fixed cash allowance to each worker for their entire health plan coverage.
- Each worker and family member will be able to purchase different coverages from different insurers at different prices.
- Each worker or dependent can have access to any plan sold in their local area, unrestricted by employer limitations.
- Workers can use some of the money for a health plan, and reserve the balance from their employer for out-of-pocket costs.
- Workers can add additional money to what their employer pays and buy as much coverage as they want.
- Workers and dependents can take their coverage from employer to employer without disruption, creating both “ownership” and “portability.”
- Workers are freed to pursue personal care needs and choices, without employer imposed restrictions, a growing concern with increasingly activist, self-insured employers.
- Employers can get OUT of the business of designing, pricing and managing health benefits, and get back into the business of…their business.
- Employers can eliminate increasingly expensive stop loss insurance, managing third party administration (TPA’s) and complex opinions of actuarial consultants.
- Employers with challenges obtaining traditional coverage due to participation, turnover, age or location dynamics, will have new options
FOR CONSUMERS WHO BUY ON THEIR OWN AND ALL TAXPAYERS:
- Due to the stabilizing effect this act will have on consumer markets, those who purchase health plans on their own (separate from employers) may find lower prices for consumer plans over time.
- Lower prices and greater stability in this consumer market will reduce taxpayer subsidies (available to low income Americans), thus saving money for all American taxpayers.
The authors of the regulation (officials from U.S. Departments of Treasury, Labor and Health & Human Services) predict that 5 million American workers (2.8% of those with traditional employer sponsored coverage) will be part of this program by 2022. Further, that 10 million will participate by 2024.
Industry experts suggest that this will motivate new players to develop competitive platforms of their own around these new consumer-based employer plans. One such company, Hixme, already sells a traditional group sponsored health benefit plan to large employers through a platform that is populated with thousands of consumer-owned choices depending upon worker zip code. This change will allow even more value in their product.
Conversely, traditional benefit consultants and brokers, who have depended on expensive design and actuarial services on an employer-by-employer basis, will have to think carefully about how to respond to this consumerization movement — since it’s clearly not a logical extension of the traditional group insurance model.
Industry experts suggest that this will inspire new players to develop platforms around consumer-based plans. One such company, Hixme, already sells a traditional group sponsored health benefit plan to large employers through a platform that is populated with thousands of consumer-owned choices depending upon worker zip code.
As a veteran executive of the healthcare industry, I believe this may be the most important large employer health benefits development since HIPAA mainstreamed tax advantaged savings account concepts for health care coverages in 1996.
- The Stabilization Act of 1942 which freed employer-sponsored health coverage from the post World War II wage and price freezes. This ultimately formed the unique basis of today’s employer sponsored health benefits.
- Title XVIII of the Social Security Act in 1965 that created Medicare for seniors.
- Title XIX of the Social Security Act in 1965 that created Medicaid for the poor and disabled.
- The Federal HMO Act which created Health Maintenance Organizations (HMO) in 1973.
- Health Insurance Portability and Accountability Act (HIPAA) of 1996 which assures health coverage as workers move between jobs (portability), established a basis for consumer-driven healthcare (tax-free accounts), and standardized coverage and pricing rules for consumer and small employer packaged coverages.
- The Medicare Modernization Act of 2003 that created the Medicare Advantage and Medicare Part D Drug Programs and also created the current Health Savings Accounts (HSAs).
- The Affordable Care Act (ACA) of 2010 that made standardized portable plans available to any American except those offered employer sponsored coverage.
- And now…. the Executive Order 13813 of 2017 that sets new rules for healthcare choice and competition across working America.
As a veteran executive of the healthcare industry, I believe this will turn out to be perhaps the most important large employer health benefits development since the HIPAA where tax advantaged savings accounts concepts were first applied to health care coverages in 1996.
Health Reimbursement Accounts (HRAs) are employer-funded group health plans from which employees are reimbursed tax-free for qualified medical expenses up to a fixed dollar amount per year. Unused amounts may be rolled over to be used in subsequent years. The employer funds and owns the account. Health Reimbursement Accounts are sometimes called Health Reimbursement Arrangements.
ABOUT THE HIXME THINK BLOG: Authored by one of the gurus of health insurance, Denny Weinberg, postings reflect market trends and the powerful emerging movements toward true portability and personal ownership by workers and their families. Postings follow these emerging trends, driven by consumer ownership of retirement benefits, consolidations by health care institutions, and the stated pro-consumerism goals and actions of the administration, federal agencies and Congress.