The Colorado News Agency reports on a bill that left restrictions on how small employers can compensate their employees:
Small business employers who cannot afford health insurance for their employees under the group market but want to provide some money for their employees to purchase a health insurance plan on their own, can do so under a recent ruling by Colorado’s Division of Insurance. Sen. Keith King, R-Colorado Springs, wants the ruling secured by law. His bill, Senate Bill 19, would do so.
“We need to find a way to insure more people,” said King. “This bill provides an alternative for small business employers to contribute toward an employee’s health insurance.”
Under the ruling, employers that don’t offer health plans and have fewer than 50 employees can contribute any amount of money, as long as it is distributed equally, into an employee’s Health Retirement Account.* The HRA funds can then be used by an employee to purchase a health insurance premium or any other qualifying medical expenses. The money stays with the employee from year to year, much like an IRA account.
Read the whole article: Bill lets small employers chip in for individual health coverage.
A representative of the AARP opposes the bill because it would “destroy the group market” and there is “cherry picking and lemon dropping” in the individual market. I doubt this bill will “destroy” the group market. And anyway, if give people more freedom destroys something propped up by an unfair tax code, then so be it. Also, as health care the Independence Institute’s Linda Gorman notes, direct-purchase insurance pools risks pretty well.
* I think HRA stands for Health Reimbursement Account, or Arrangement. The Bureau of Labor Statistics article on Health Spending Accounts describes HRAs and contrasts them with Flexible Spending Accounts (FSAs) and Health Savings Accounts (HSAs). HSAs succeeded Medical Savings Accounts referred to in the article.
Confused yet? If only the IRS were neutral when it comes to how we buy insurance or pay for medical care. Then these accounts would vanish.
See also John Goodman’s 2006 article in Health Affairs: Employer-Sponsored, Personal, And Portable Health Insurance and the section on realth reimbursement arrangements.