Administration’s HRA Rule Expands Health Options, Affordability for Employers and Families


There’s good news for employers struggling with the high costs and administrative burdens of providing health care. They will find it much easier to offer their employees access to insurance under a final rule introduced Thursday by the Departments of Treasury, Labor, and Health and Human Services (HHS).

The rule will make it easier for small, mid-sized, and large employers to set up health reimbursement arrangements (HRAs) for their workforce. Currently, HRAs allow employers to make tax-free contributions to the medical expenses of their employees.

This rule sets up a new kind of HRA, starting in January 2020, called an “Individual Coverage HRA.” The Individual Coverage HRA enables employers to provide contributions to the cost of health insurance purchased by their employees on the individual market. This rule reverses the previous administration’s guidance, which prohibited employers from using HRAs toward the cost of individual marketplace plans.

So, who will benefit from the expansion of HRAs? First and foremost, individuals and families who currently don’t have access to affordable care. HHS estimates that the 800,000 employers who will benefit from the expansion of HRAs cover 11 million employees and their family members. Some of those individuals who will benefit, about 800,000, would otherwise be uninsured.

The rule will also benefit small businesses. The Kaiser Family Foundation found that in 2018 only 54 percent of firms with 3-49 workers offered health benefits, compared to 89 percent of firms with 50-99 workers and 96 percent of firms with 100 or more workers. The expansion of HRAs will give small employers an affordable option to provide health insurance to their employees. This, HHS notes, will also help small businesses compete with large businesses for talented workers.

The HRA rule is the final step in a series of moves by the Trump administration to provide “high-quality care at affordable prices for the American people.” Prior efforts by the administration include short-term, limited-duration (STLDI) health plans, which NTU supported, and association health plans (AHPs). All told, HHS estimates that the expansion of HRAs, AHPs, and STLDIs could increase the number of people with private insurance by 2 million. These efforts show that it’s possible to expand access to health insurance for Americans with free market options that offer choice, flexibility, and affordability.