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December 2017  Volume 15, Number 12        

health benefits

Proposed Changes to Group Health Insurance for Small Employers

The president and congress continue proposing changes to healthcare laws and the country continues to debate what the effects of those proposals will be.

President Donald Trump signed an Executive Order to provide health insurance cost relief for small businesses. The Trump administration believes these changes will expand choices, increase competition and bring down costs.

Many who oppose the order say that while the changes could provide less expensive options for employers and their employees, it has the potential to increase costs for those who purchase individual plans on the Affordable Care Act (ACA) Marketplace Exchanges.

The two main recommendations that may affect employers are expanding access to Association Health Plans (AHPs) and changes to Health Reimbursement Arrangements (HRAs).

None of the Executive Order provisions are scheduled to take effect anytime soon. Many of the details have been left to federal agencies to establish.


An Association Health Plan is a group of similar businesses that band together to purchase group health insurance. This gives them greater bargaining power and access to a broader range of insurance options at lower rates — similar to a large group market.

Trump’s Executive Order directs the secretaries of Health and Human Services, Labor and the Treasury Departments to re-establish healthcare associations. These associations were in place before the ACA became law, but were mainly used by trade organizations and business groups.

The Executive Order also allows AHPs to bypass current Minimum Essential Coverage requirements. Observers have concerns that companies with young and healthy employees will purchase bare-bone inexpensive plans, while companies with older employees will have higher costs because of their older, less healthy employees. Employers also could “cherry pick,” and only choose younger workers as a way to reduce health benefit plan costs.

To expand access to an AHP arrangement, Congress must agree to a broader interpretation of the Employee Retirement Income Security Act which would allow employers in the same line of business — even if located in different states — to form an association to offer group health insurance to their employees.

If this change is implemented, employers would not be allowed to exclude any employee from joining the plan, or to develop premiums based on health conditions.

Proponents of the idea believe this broader interpretation would mean that self-employed individuals also may be able to join an AHP to take advantage of the plan’s lower health insurance rates. On the other hand, opponents fear that allowing self-employed workers to join a group plan could hurt the individual market, especially if those workers are healthy. That scenario would leave only sick workers to support the market.


An HRA is an employer-funded health savings account that employees can use for healthcare expenses, including deductibles and copayments. Contributions to the fund are not counted as taxable income, and only employers are allowed to contribute to the plan. Any funds left in the account at the end of the year can be used in subsequent years or deemed forfeited at the employer’s choice.

Trump’s Executive Order also directs the Departments of Treasury, Labor, and Health and Human Services to reduce restrictions on HRAs, which would allow more generous funding for the plans. Potentially, employers also could fund HRAs with tax-free dollars so that employees could buy coverage on the individual market. Currently, only employers with fewer than 50 employees can fund an HRA for that purpose.

One question that remains unanswered is whether employers would be able to contribute enough so that employees could obtain comparable coverage at a comparable price.

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In this issue:

This Just In...

Changes to 401(k) Plans Under Consideration

Vision Insurance Trends to Incorporate in Your Benefit Plans

Proposed Changes to Group Health Insurance for Small Employers

Getting the Most Out of Disability Benefits



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