The individual coverage HRA brings more lives to the individual market—an important initiative for Democrats—and provides consumer choice and flexibility that Republicans insist on
Caught in the cross-hairs of record unemployment rates, an uncertain economy, and a combative political atmosphere, health care has never been more important. In fact, as we look ahead at the upcoming transition of power, health care will forever be tied to Biden’s legacy. While Trump’s plan rested squarely on repealing the ACA, Biden has been very clear about his hopes to mend it.
The President-Elect speaks of building bridges and healing, versus creating new, sweeping changes, but many are wondering whether Biden plans to undo President Trump’s previous executive orders related to health care in a similar fashion as his predecessor.
If you unpack everything and lay it out on the table, there are several obvious reversals Biden will take when it comes to President Trump’s health care reform initiatives, like Trump’s increased access to short term plans, open enrollment funding cuts, and several socially driven health issues (like cuts to government funding for the costs of abortion and LGBTQ care).
But despite efforts from both sides to deny it, there exists some common ground shared by both administrations when it comes to health care reform and the flaws of Obamacare. Biden may choose to keep certain common-sense elements inherited from the Trump administration, like value-based care, measures toward drug price control and transparency, and increased access to telehealth.
Another successful measure created by the Departments during the Trump administration is the creation of the Individual Coverage HRA (ICHRA, for short), which is a benefits model based on reimbursing employees for health insurance rather than buying it for them. While Biden hasn’t spoken directly to it, ICHRA already shows early evidence that it will help fulfill Biden’s goal of strengthening the ACA.
ICHRA and ACA: The potential for synergy
Biden has repeatedly said he wants to fix some of the issues that have plagued the individual market from the beginning, and the Obamacare markets by many measures are officially back after several years of shortcomings. Average premiums decreased this year for the third year in a row, carriers have extended their footprints and are actively investing in growing their individual insurance products, and more than 800,0000 individuals have enrolled during the first week of 2021 open enrollment according to CMS.
As these Obamacare issues get fixed, more lives come to the individual market, which makes the market more competitive, which draws more ICHRA interest, which adds more lives to the market, and so on.
Biden has also promised to introduce a “public option” onto the exchanges to drive competition. Although there are a lot of unknowns on how this might shape up, adding more options to the individual market would give employees more choice and make ICHRA more appealing.
What’s more, ICHRA is securing coverage for people who haven’t previously had coverage assistance from their employer (blue collar workers are trending among employees reimbursed by larger employers). Among our small clients, more than 70% of early ICHRA adopters are new to offering benefits. The group model simply never worked for them. On top of that, these employees are being reimbursed for high-quality care, compliant with the requirements of the ACA.
With our ICHRA clients alone, we have seen hundreds of individuals get help with health insurance from their employer for the first time, and millions of dollars in reimbursements this year alone.
Lowering the Medicare age
A cornerstone of Biden’s campaign was establishing Medicare for More by lowering the Medicare age threshold. As older employees typically spend much more on health care compared to younger employees (8x as much), it makes covering older employees much more expensive and the rest of the group has to absorb the costs. ICHRA is unique because it can reimburse individual insurance as well as Medicare.
If the Medicare eligibility age is lowered from 65 to 60 or even 55, you’d most likely see a mass migration away from group plans (which currently require you to maintain coverage for active employees even if they’re over 65) towards ICHRA as it would dramatically lower employer costs and deliver better plans for employees.
The bipartisan health policy that no one talks about
Starting 60 years ago in the complex history of tax law, Eisenhower asked the IRS to lift taxes on health insurance for employers, effectively creating employer-based health coverage. The unfortunate side effect was that this system discriminated against those who didn’t have employer-based care, meaning the elderly, the disadvantaged, the lower end of the labor market had to buy their own insurance with post-tax dollars.
Fast forward, and you’ll see the results of a piecemeal effort to cover those who fell in the gaps: Medicare was established for the elderly, Medicaid and Chip programs were created to cover disadvantaged families and youth that couldn’t afford coverage. Fast forward again, and you’ll see these same tax advantages erased for small businesses as an unintended consequence of Obamacare and its requirements and categorizations of group plans.
In 2016, this issue was cleared up with support from both sides. Vice President Biden himself championed the 21st Century Cures Act, a hodge-podge bill that included funding for cancer research as well as guidelines for establishing the Qualified Small Employer HRA, ICHRA’s predecessor. Now employers could reimburse tax-free and receive the same tax treatment as traditional group benefit plans.
Trump further expanded upon health reimbursement arrangements via executive order, prompting the Departments to issue regulatory rules that allowed more employers to reimburse for insurance with fewer limitations. This move was met without any clear opposition, further emphasizing that HRAs are part of a series of incremental common-sense changes that are fixing the system from both sides of the aisle.
Looking forward, there’s a strong chance that Biden will be working with a Republican Senate to implement his legislative agenda. Although health care reform has been very contentious, we refer to ICHRA as the “bipartisan health policy that no one talks about.” We think the ICHRA model could be the key to bipartisan success—it delivers more lives to the individual market which is important to Democrats, and provides consumer choice and flexibility that Republicans insist on.
In fact, there’s plenty of room to the left and the right of center for ICHRA to thrive, which explains why, despite their many differences, two administrations and two political ideologies can agree on something.
A bridge to a better health care system
The current administration has projected that upwards of 11 million workers and families will benefit from ICHRA, with 800,000 of those being new to benefits assistance. For the reasons described above, we believe the Biden presidency could be the tipping point for ICHRA, extending the benefit to closer to 30-40 million lives—closer to what the Obama Administration projected would be the participation in the individual markets when they were first launched.
With its bipartisan history, its ability to interact with Medicare, and its success bringing new lives to the Obamacare markets, we believe ICHRA could be one of hopefully a few “bridges” that help to fix the health care system from both sides.
Jack Hooper is an HRA advocate and the co-founder and CEO of health tech startup Take Command Health. He is a graduate of the Wharton School of Business and has been featured in The New York Times, BenefitsPro, Dallas Morning News, Bloomberg and more.