On June 13, the U.S. Departments of Health and Human Services, Labor and Treasury issued a final rule that creates two new kinds of Health Reimbursement Arrangements (HRAs) – the Individual Coverage HRA (ICHRA) and the Excepted Benefit HRA – effective for January 1, 2020 effective dates.
This final ruling is in response to the Trump administration’s October 2017 executive order on healthcare choice and competition.
Individual Coverage HRA
The ICHRA allows employers of all sizes that do not offer a group coverage plan to fund an HRA for employees to buy individual-market insurance, including insurance purchased on the public exchanges formed under the Affordable Care Act (ACA).
Currently, qualified small-employer HRAs (QSHRAs) that were created by Congress in December 2016, allow small business with less than 50 full-time employees (FTEs) to use pretax dollars to reimburse employees who buy non-group health coverage. This ICHRA rule goes even further and doesn’t cap employer contributions. As a result, employers with less than 50 FTEs will have two choices – a QSEHRA or an ICHRA – with some regulatory differences between the two.
The departments posted an FAQ on the new rule that includes a model ICHRA employee notice and attestation form that complies with the new rule’s disclosure provision and aims to explain the type of HRA being offered and communicate that individuals may become ineligible for a premium or tax subsidy when participating in an ACA exchange-based plan.
If employers choose to offer this new ICHRA benefit in 2020, they will need to take action before then, including the required notice for eligible participants. Employees who want to take advantage of an ICHRA in the new year must enroll in an individual health plan during the open enrollment period (unless they have Medicare) that generally runs between November 1 and December 15, 2019.
Excepted Benefit HRA
The Excepted Benefit HRA will increase flexibility for employer-sponsored insurance. It can be offered in addition to a traditional group health plan to permit employers to finance up to $1,800 (pretax) of additional medical care (such as copays, deductibles, premiums for vision, dental, COBRA and short-term insurance coverage), even if the employee has declined enrollment in the traditional group health plan.
These HRA rules will provide hundreds of thousands of businesses a better way to offer health insurance coverage so that millions of workers and their families can obtain the best coverage for their needs.
The ICHRA will help small employers compete for talent as they have typically faced unaffordable costs that prevent them from offering a traditional group health plan, and, in particular, the Excepted Benefit HRA will benefit the growing number of employees who have opted out of their employer’s traditional group health plan because their share is too expensive.
The departments estimate that these HRA rules will help 800,000 employers insure more than 11 million employees and family members of which 800,000 were previously uninsured.