Yesterday, the House of Representatives passed a healthcare policy to help businesses and workers, extend coverage to hundreds of thousands of previously uninsured, and improve the Obamacare individual market. This policy was part of a broader legislative package aimed at easing employers’ ability to offer health coverage and helping employees at those companies obtain coverage.
Every Republican in the House supported this legislation, while no Democrats did. Still, there are several reasons lawmakers ought to make this a bipartisan priority and celebrate the bill’s passage.
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Specifically, a central component of the CHOICE Arrangement Act would codify a Trump administration rule that gives employers another way to offer health coverage to their employees. This rule created individual coverage health reimbursement arrangements. Using an ICHRA, an employer provides tax-free contributions that employees can use to buy an individual market health insurance plan that works best for them and their families.
ICHRAs build off the Qualified Small Employer Health Reimbursement Arrangements signed into law by former President Barack Obama. ICHRAs address several QSEHRA limitations, such as only being available to small employers and limiting contribution amounts. As a testament to their bipartisan appeal, the Biden administration has not even suggested rolling back the ICHRA rule.
There are likely around half a million employees and employees’ dependents enrolled in the individual market using an ICHRA or QSEHRA. Most ICHRAs are offered by small and mid-sized firms, and many people enrolled through an ICHRA would be uninsured otherwise.
Republicans supported codification for several reasons.
First and foremost, ICHRAs provide employees with more choices of health insurance, as most employees lack meaningful choices of health insurance when the employer selects the plan for everyone at the company. ICHRAs also reduce administrative costs and hassles for businesses that offer coverage. And, ICHRAs expand coverage without any new government spending, somewhat reducing the number of people reliant on large government subsidies, either through the exchanges or through Medicaid, for their coverage.
While ICHRAs advance several Democratic health policy goals, Democratic members have expressed concern about their codification. A better understanding of ICHRAs would alleviate these concerns.
ICHRAs will grow the number of people with individual market health insurance and will improve that market, both of which are Democratic priorities. Some Democratic members stated that people could use an ICHRA to buy a “junk plan,” but the only plans that ICHRAs can purchase are Obamacare plans. ICHRAs permit more portable coverage and reduce the number of uninsured people — those are also Democratic priorities.
ICHRAs will not make up for some of Obamacare’s profound flaws, particularly the mix of regulations and subsidies that led to high-priced plans with large deductibles and narrow networks in many parts of the country.
But by growing the number of people with individual market coverage, ICHRAs should create a virtuous cycle: more enrollees will lead to more insurers participating in the market, additional plans and competition between them will create a more attractive market, the better market will lead more employers to offer ICHRAs, leading to more enrollees, and so on.
Some Democrats expressed concern that the rule permits employers to create classes of workers for the purchase of insurance. These classes permit employers to offer coverage that best meets their employees’ needs.
For example, consider a firm with two plants — one in Arizona and one in Florida. Since the individual market is much stronger in Florida than in Arizona, these classes permit the employer to offer an ICHRA to its Florida employees and keep Arizona employees on the group plan. The classes also permit employers to extend coverage to workers in certain classes, such as part-time workers, who have not previously been offered a plan.
ICHRAs benefit both employers and employees and could improve the individual market significantly. Congressional codification of the ICHRA rule would provide greater certainty about the market going forward and would produce further bipartisan interest in creating a well-functioning individual health insurance market.
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While it is unlikely that the Senate will take up this legislation, it should. Regardless, the House should get a lot of credit for passing a codification of ICHRAs. Doing so helps increase awareness about this option that would empower families to choose the health insurance that works best for them, and is a necessary step for legislation eventually being passed by both chambers and signed by the president.
Brian Blase, who served as a special assistant to former President Donald Trump at the National Economic Council, is president of Paragon Health Institute. Blase coordinated the development of the ICHRA rule when he was at the National Economic Council.
