The Trump administration moved Monday to make cheap Obamacare alternatives eligible for employer-based subsidies, the latest in its efforts to increase access to insurance plans that do not comply with Obamacare’s regulations.
Administration officials announced their intention to propose a regulation Tuesday that would let large employers make tax-free contributions to employees that purchase cheaper short-term health plans, which offer fewer benefits than plans sold on Obamacare's exchanges.
The goal behind the employer regulation is "empowering workers and employers to make their own decisions with more options,” a senior administration official told reporters on Monday.
The Trump proposal would revise rules introduced by the Obama administration in 2013 that governed health reimbursement arrangements, which allow employers to cover medical costs for employees outside of an employer-sponsored health plan. Employer-provided health insurance enjoys a major tax advantage in that it is excluded from taxable income.
The 2013 rule said that an employer could make a tax-free contribution to the premiums of an employee, but only for a qualified Obamacare plan that covers pre-existing conditions and requires coverage of essential health benefits. An employer who wanted to contribute to a plan that was not a qualified Obamacare plan, like a short-term plan, would not get the tax benefits.
The 21st Century Cures Act of 2016 revoked the rule for small businesses that had 50 or fewer employees, but it remained for large businesses.
Now the Trump administration wants to eliminate the rule for all employers just as it is promoting the expansion of short-term plans.
Earlier this year, the Trump administration finalized regulations to expand the duration of short-term health plans from 90 days to nearly 12 months, allowing them to present a viable alternative to Obamacare plans for more people. It also expanded access to association health plans, another Obamacare alternative through which individuals and small groups band together to buy insurance.
The administration also released on Monday new guidance that would let states rewrite major Obamacare rules through a waiver. The guidance could allow states to get waivers to give customers of short-term and association plans subsidies to pay down their cost, which could lower the cost of the plans even further.
But critics warn that the proliferation of short-term and association health plans raise the risk of destabilizing Obamacare’s exchanges, because people would flock to the cheaper plans. This would mean only sicker people would remain in the law’s exchanges and would drive up the cost of insurance, thus imperiling coverage for people with pre-existing conditions.
“The administration plainly admitted its intention is to use taxpayer dollars to fund junk insurance plans that don’t cover pre-existing conditions,” said Senate Minority Leader Chuck Schumer, D-N.Y., in a statement Monday on the waiver changes.