Employees will benefit from new HRA regulations, whichpermit employers who offer traditional health plans to provide anexcepted benefit HRA of up to $1,800 per year. (Photo:Shutterstock)

The three rulings resulting from a 2017 executive order will have a significantimpact on the health care market by providing businesses andemployees with additional health insurance options. These changesshould be a catalyst for employers to review benefits programs aspart of total employee compensation and consider optimizing healthbenefits to attract and retain employees.

Employers are tired of the merry-go-round approach. Whether amedical or ancillary benefit renewal, employee compensation reviewsor payments for 401(k) matches, for employers to achieve optimalprograms that meet their needs and those of employees, they need todo something different.

A Society for Human Resource Management survey found employersthat approach employee benefits programs strategically are nearlytwice as likely to have more satisfied employees and to reportbetter business performance than organizations that don’t.

Related: Broker and consultants are key to proactivebenefits

The October 2017 executive order that launched all of thesechanges is intended to promote health care choices and competitionby revising three components of the Affordable Care Act (ACA):association health plans (AHPs), short-term limited-durationinsurance (STLDI) and health reimbursement arrangements (HRAs).

HRA ruling

HRAs in particular will transform the health insurance arena aswe know it. The new HRA ruling gives employees greater controlover their salaries while allowing employers to have more controlover year-to-year expenditures.

The new HRA regulations will permit employers to contribute anyamount to individual coverage HRAs (ICHRA) as long as it isavailable on the same terms to all individuals within a class ofemployees. However, increases are permissible for older workers andthose with more dependents.

Employees will benefit from the regulations, which now permitemployers who offer traditional health plans to provide an exceptedbenefit HRA of up to $1,800 per year even if the employee does notenroll in the traditional group health plan. The HRA dollars can beused to reimburse employees for certain qualified medical expenses,including premiums for vision, dental and short-term limitedduration insurance. Essentially, this creates a limited standaloneHRA that would be exempt from ACA requirements if the employee wasoffered traditional group coverage.

Smaller employers will now be able to better attract, retain andmotivate their employees without the high cost and complexity ofproviding health coverage. Employees will also have increasedportability of coverage and options to meet their individual needsthrough the market or exchange.

AHP ruling

Action came quickly with the release of the final rule for AHPs in June 2018, allowingsmall employers to offer health insurance on terms similar to thatof large employers. Small employers will have a larger pool and theability to spread risk and administrative costs, avoiding many ofthe ACA’s costly requirements and providing more affordable healthinsurance options.

The final ruling relaxes the “commonality of interest” standardallowing businesses to tie together only by being in the same lineof business or geographic area to form an association for the solepurpose of offering health coverage. Structurally, members whocontrol the plan will have group functions and activityresponsibilities. Additionally, the AHP must have a governing bodyand bylaws for legal formalities as well as meet all EmployeeRetirement Income Security Act (ERISA) provisions applicable togroup health plans and employee welfare plans.

STLDI ruling

Designed to fill temporary gaps in coverage when individuals aretransitioning from one plan to another, STLDI is exempt from theindividual health insurance coverage mandate and is not required tocomply with ACA regulations. The ruling allows insurers to renew orextend short-term coverage for up to 36 months as well as limitcoverage of pre-existing conditions and benefits includinghospitalization, emergency services, maternity care, preventivecare, prescription drugs, and mental health and substance abuseservices. Insurers are permitted to rescind coverage and requirehigher premiums based on health status and out-of-pocket costsharing than permitted under the ACA.

Opposition

Industry groups and health care organizations, however, say thatthe HRA changes could result in higher costs, limit accessibilityand cause employees to drop ACA- compliant coverage for AHPs,creating a less healthy and costlier ACA risk pool. The AmericanMedical Association and other leading provider organizations haveobjected to short-term health plan rules that allow individuals toenroll in plans that do not cover essential health benefits forthree years.2

Total compensation

These changes are a great opportunity for employers to revisittotal compensation packages through analysis of salary, benefits,ancillary benefits, retirement and PTO.

Employers (especially small businesses) should review the newavailable coverage options and determine how to create a moreattractive total compensation strategy.

Employers need to determine how benefits and compensation fitwithin their corporate objectives in terms of cost andflexibility:

• Is the total compensation package flexible enough to meetdiverse employee needs?
• Is it competitive enough to increase retention andmotivation?
• Is it the right percentage of the total operating budget?

Similar to the initial rollout of the ACA, the new healthinsurance rulings are game changers. Now is the time for companiesto think strategically about the importance of benefits programs intheir total compensation philosophy.

ElliotDinkin is president and CEO of CowdenAssociates, a Pittsburgh-based company specializing in helpingcorporate clients find the best solutions for compensation,healthcare benefits, retirement and pension issues, andTaft-Hartley fund consulting.

Read more: 

• Addressing 401(k)s, health benefits andcompensation after a merger or acquisition
• Unpacking the new HRA option for employee healthinsurance
• 5 factors to consider before plunging into a totalrewards program