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HRA Ruling Could Alter Future Health-Care Landscape

Imagine a world without employer-sponsored health care. Late last week, the Trump administration finalized rules that could signal the beginning of that movement.

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One element of the rules will let employers pay for their workers’ health insurance by subsidizing premiums in the Affordable Care Act’s individual market. It does this by making health reimbursement arrangement (HRA) plans more accessible to workers nationwide.

The use of HRA plans, which are funded with pre-tax money by employers, has long been restricted to exclude paying for insurance premiums. The new ruling, which goes into effect in Jan. 1, 2020, will change that.

John Barkett, director of policy affairs at Willis Towers Watson, worked in the Obama administration and helped write the ACA. Barkett said this rule will present employers with an interesting decision that wasn’t available before the ACA.

“Pre-ACA, employers could have offered this model to their workforce. Most did not, because they couldn’t guarantee everyone they employed would be able to find health insurance,” Barkett said. “Insurance companies in the individual market could turn their employees down for having preexisting conditions. So, even though it was possible, most employers didn’t use this model if they wanted to offer benefits to everyone in their workforce.”  

The Trump administration projects that 800,000 employers, most with fewer than 20 workers, will eventually offer HRAs to help 11 million workers purchase individual insurance coverage by 2029. Whether those future projections are accurate will rely heavily on the whims of employers. It’s a model that could be attractive to employers from a portability and convenience standpoint, Barkett said, because employees who purchase health care on the individual market could bring it with them when they switch jobs.

There’s also an interesting political dynamic potentially underscoring these new rules, which could have a profound affect on the health-care market going forward, Barkett said.

“By endorsing the HRA model, Republicans are tacitly endorsing the underlying marketplace that supplies plans to the HRA model, which is the ACA marketplaces,” Barkett said. “If Republicans can stand up and say they’re supporting small business, and Democrats can get up and say they support the public exchanges and then agree on policies that support the individual marketplace on the whole, that could be a dynamic that we haven’t seen since the passage of the ACA in Washington. It could lead to betterment for the whole market.” 

Some are forecasting that a shift to HRAs could resemble the movement in retirement benefits from defined benefit pensions to 401(k) plans, where employers make fixed contributions instead of promising a set benefit for years in the future. Adopting the HRA model would provide businesses with more predictable costs while shifting the risk of higher health-care expenses onto workers.

The overarching goal of the rules is to provide Americans with more choice when selecting health plans. Some experts worry that more people will go the cheap route and end up with less comprehensive coverage. However, Barkett suggested that could eventually force health providers to readjust their plans. 

“The more patients that move into the individual market, the more providers may be forced to compete, either with their own insurance products, or working with only a handful of insurers, not only the big ones,” Barkett said. “That could be a good thing for consumers.”

Ultimately, it will take a while for these rules to take hold, Barkett said. But it’s not hard to picture a future where employees, not employers, are in charge of choosing their own health care packages. 

“This is going to take time to play out — trends in employer purchasing usually take years to play out,” Barkett said. “Employers often look and see what their competitors are doing, so there’s always a chicken-and-egg problem when it comes to employers adopting trends. You can see how we might not have anything change if everyone’s thinking that way.”

STUDENT LOAN ASSISTANCE

Student Loan Debt Repayment Is an Emerging Benefit 
As a new crop of workers matriculates into the workforce — many of which are bringing their sizable student loan debt along with them — an increasing number of employers are offering a life raft.

Student loan debt repayment programs is a benefit that’s on the rise and is expected to be more prevalent in the future, according to a Willis Towers Watson survey. As of 2018, 4% of employers were contributing to student loans. However, 32% of employers surveyed plan to make contributions to their employees’ student loans. Likewise, employers offering student loan consolidation is expected to jump from 8% to 34% over the same timeframe.

Similar to Willis Towers Watson’s research, WorldatWork’s “2018 Total Rewards Inventory Program and Practices survey found that the benefit was still uncommon a year ago, as 6% of employers surveyed offered a student loan debt repayment program, which was up only slightly from 4% in 2017.

It’s a benefit that many college graduates crave when determining what organization to start their career with, according to an Abbott Laboratories survey. Abbott’s research found that 90% of college students are on the hunt for a company with a student loan perk and 62% of currently employed adults with student loans would consider switching companies to gain a student loan relief benefit.

“I would say that a student loan program is an amazing tool for attraction,” said Lydia Jilek, senior director of voluntary benefits at Willis Towers Watson.

Abbott, of course, instituted its Freedom 2 Save Program in 2018, which allows employees to pay off student loans while still obtaining a typical 401(k) match. The program dictates that if an Abbott employee puts at least 2% of pay toward student loans, the company will put 5% of their pay into a 401(k) account.

Abbott was granted permission to install the plan via an IRS private letter ruling in August. Now, the U.S. Treasury will rule whether all employers can institute a similar plan moving forward.

“Abbott’s plan sort of took the blinders off employers that were otherwise focused on the traditional models that the vendors had established,” Jilek said. “This created sort of a new era that we have seen within the last 10 months, where we’re seeing a lot more of our clients come to us with [interest in Abbott’s plan]. What that has done is its shown employers that they don’t have to follow specifically what the vendors in the space have established as parameters.”

To Jilek’s point, many employers and industry groups have pushed for legislation that provides comprehensive guidance on how employers can and should structure student loan repayment benefits under their retirement plans, according to the National Law Review. The Retirement Parity for Student Loans Act, if enacted, would do just that.

However, while there are many benefits to creating a student loan debt repayment program, employers shouldn’t rush to implement one just because it’s currently in vogue.

“A program like this is a personal decision for an organization. It depends on your demographics, how your employees are feeling, what your industry is, what your financial well-being profile is,” said Peter Debellis, total rewards research leader at Deloitte, at WorldatWork’s Total Rewards Conference in May. “It’s not something to do lightly. It can have some serious financial ramifications, so it’s something to step in thoughtfully if you are thinking about going down this road.”

Plenty of employers, big and small, are taking the initial steps down this road. Walmart Inc. became the biggest name to join the list, as the nation’s largest private employer said Tuesday it will offer debt-free college benefits to high schoolers to attract and retain workers. More private employers are likely to follow with their own creative take on the benefit offering, but it could be a few years before it’s widespread, Jilek said.

“What I think we’re going to see is we’re not going to get to those significant levels by 2021, but we’re going to see continued movement in that direction,” Jilek said. “There are probably other employers out there that are looking at doing private letter rulings of their own to continue the progression of these types of models. I think we’re going to continue to see an expansion of employers helping employees with their student loan debt. However, I don’t think we’re going to exclusively see the traditional models.”

BLOCKCHAIN 

Blockchain’s Future in the HR World 
A blockchain is a continuously growing list of records, called blocks, which are linked and secured using cryptography. Each block typically contains a hash pointer as a link to a previous block, a timestamp and transaction data. By design, blockchain is inherently resistant to modification of the data.

Last year was a bad year for cryptocurrency. Scams ratcheted up and prices plummeted, which created a shortsighted sense of doom around the technology associated with it. Bitcoin has since recovered and stabilized this year

Blockchain, which is the underlying ledger for which cryptocurrency was built on, has become its own disruptive force that is poised to shakeup how the world does business. And corporations are paying attention, exploring the use cases today and tomorrow for the emerging technology.

From a human resources perspective, blockchain can be utilized in a variety of ways. The technology is believed to provide for accurate and tamper-proof data, which could be used for background checks and other hiring practices.

“One use case is in the case of hiring and checking out references. Due to the the immutability of blockchain, it's possible to immortalize and timestamp a person's qualifications,” said Gordon Koo, CCP, WorldatWork member and senior compensation analyst in the media industry. “So a university or an issuing organization, can issue a person's graduation or certification and it cannot be forged and [will] be easily verified against the issuing bodies' PGP (Pretty Good Privacy) key.”

In a Workspan magazine feature from 2018, Koo said the technology could greatly affect how payroll is done, especially in countries where the government currency is extremely volatile or where access to the financial banking system is unable to provide services effectively.  

“By using a cryptocurrency like Bitcoin or ether, it’s possible to pay the employee wages much more quickly, at a lower cost and without a financial intermediary,” Koo said. “It could be difficult to set compensation when a country is currently undergoing hyperinflation, or if there are restrictions within the financial sector.”

Although the term is already part of the day-to-day vernacular, blockchain is still very much a future concept. Koo said he hasn’t seen the technology being leveraged in the HR profession at all, saying that most companies are still “getting a feel for it.”

“For usage within HR, I don't see that this is coming anytime soon at least within the next five years,” Koo said. “The technology is just starting to be adopted by the tech giants and accounting giants of the industry.”

But make no mistake, the blockchain disruption is coming, and could have a profound effect on the way HR operates.

“Those responsible for employee data should get up to speed on [blockchain] very quickly,” said Jeff Mike, vice president and HR research leader at Bersin, Deloitte LLP. “They need to start planning ahead as to how blockchain is going to change work, the business implications of it, and how that will affect the role of HR as stewards of data.”

About the Author

Brett Christie is a staff writer at WorldatWork.


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