Is there anything that can bring Democrats and Republicans together on health care?
Democrats support a greater role for government in the provision of—and payment for—health care. Republicans generally push for deregulation, consumerism, and competition.
So what about a healthcare policy that would encourage individuals to shop around for coverage that meets their needs but would also enroll more people in Obamacare’s exchanges? Perhaps that would attract support from Republicans and Democrats alike?
We may find out. In June, the House of Representatives passed the CHOICE Arrangement Act, which would codify a Trump administration rule establishing individual coverage health reimbursement arrangements, or ICHRAs. The concept is simple—ICHRAs allow employers to provide tax-free dollars to their employees to purchase health coverage in the individual market.
Still, some progressives oppose ICHRAs and are pushing the Biden administration to quash this approach.
That would be a mistake. Like all policies that give patients control over their health benefits, ICHRAs will help employers and employees get better value for their healthcare dollar.
Most Americans—more than 54%, according to the U.S. Census Bureau—get health insurance through their employer. But this employer-sponsored system isn’t perfect. For starters, people risk losing their insurance when they lose or change their jobs. That reality tends to discourage people from leaving jobs in pursuit of something better—or from striking out on their own to build new businesses.
The status quo is also extremely costly for employers. The cost of employer plans already averages more than $14,600 per employee. And it’s projected to climb 6.5% next year.
Large firms may be able to absorb those costs. But such expenses tend to be too much for small firms. One study found that less than one-third of firms with fewer than 50 people offer their employees health insurance.
Workers at those firms—or any American who isn’t satisfied with their employer’s insurance plan—must purchase coverage from the individual market. But they can’t do so on equal terms with their peers who get coverage through work. Employer-sponsored insurance is tax-free; people shopping in the individual market must use post-tax dollars.
Enter ICHRAs. They allow employers who might otherwise not provide health benefits to offer their employees some level of financial assistance with health care. And they help employees purchase health coverage that suits them and that they can carry with them from job to job, rather than settling for a one-size-fits-all employer plan.
This is more than just a matter of convenience. One study found that expanding the number of insurance options available offers enrollees the savings equivalent of a 13% reduction in premiums.
People are already taking notice of these benefits. About 500,000 people use ICHRAs today. The Congressional Budget Office estimates that some 2 million will be enrolled by 2032.
But not everyone sees it this way. Where Republicans see ICHRAs as a way to give employers and employees more insurance choices, Democrats tend to view them as a tool for employers to get out of offering health coverage to employees.
The Democrats’ critique is puzzling, given that ICHRA funds can only be used to purchase Obamacare-compliant individual market plans. In fact, expanding ICHRAs could boost exchange enrollment and bolster other Democratic health policy priorities.
As the Paragon Health Institute’s Brian Blase notes, by bringing more people into the individual market, ICHRAs could “create a virtuous cycle” whereby more insurers re-enter the market, fostering competition that will drive down costs, which “will lead more employers to offer ICHRAs, leading to more enrollees, and so on.”
On top of that, Blase observes, expanding ICHRAs will bolster the individual market without a single cent of government subsidies.
Expanding access to affordable health coverage should be a goal on which Republicans and Democrats can agree. ICHRAs can do just that—and deserve to be available to more Americans.