To expand flexibility for HRAs, the Trump administration asked the Departments of Treasury, Labor, and Health and Human Services to propose regulations to make this a possibility. An executive order from President Trump enlisted the departments to increase availability and usability of HRAs. So in what way do these changes help employers and their staff when it comes to health insurance?
When an employer offers traditional group insurance, the employees are confined to specific plans and premium amounts. However, when they choose to offer an Individual Coverage HRA plan, the employers then have complete control over the budget. Furthermore, they can design the plan that best fits the needs of their company. Employers will determine the amount they reimburse as well as which employees are eligible to participate (with the understanding that each employee is treated equally and fairly.) Employees will be able to select their own insurance and receive reimbursement from their employers.
No caps on annual allowance
With QSEHRA plans in 2018, an annual cap is placed at $5,050 for individuals and $10,250 for employees with families. Additionally, allowance amounts are only able to be determined by family size and age, but not by employee class. When choosing an ICHRA plan, the employer can determine the allowance amounts according to age and family size as well as employee class.
They will meet corporate mandates
We are anticipating the IRS to set specific guidelines to help large employers that are subject to the corporate mandate determine what their minimum HRA contributions should be to meet the mandate. There are some safe harbors that are being set in place to make Individual Coverage HRAs more practical for large employers. They intend to allow large employers to base HRA rates on the business location rather than the employee’s address as well as allowing large employers to estimate an employee’s household wages based on either W-2 wages, rate of pay, or federal poverty line.
Option to provide group insurance policies
Currently, if an employer provides a QSEHRA plan to their staff, they cannot also offer group insurance of any kind. With the Individual Coverage HRA proposal, businesses that provide the ICHRA plans will also have the option to offer a traditional group health insurance policy, but they may not offer both to the same employee class. As an example, the employer could offer a group policy to full-time employees and an ICHRA plan to part-time employees. Keep in mind that a full-time employee would not have access to an ICHRA plan and a part-time employee would not have access to the group policy.
Employees may opt out of individual coverage HRA plans
If an employee participates in an ICHRA, they are not permitted to use any premium tax credits. The good news is that employees are free to opt out of any offered ICHRA. Those who do so would still be eligible for the premium tax credit as long as the HRA’s allowance amount was considered “unaffordable” and didn’t provide minimum value under the ACA. ICHRA is considered unaffordable if the remaining portion an employee has to pay for a self-only silver plan (this is the lowest cost silver plan) is more than 9.86% of their household income.
We are just as excited as you are to find out what will happen with these proposed HRAs now that the comments period has come to a close. The Departments of Treasury, Labor, and Health and Human Services requested for commentary on their proposed regulations and Take Command Health responded with our own comprehensive and exclusive research. We believe this research could help set up this new generation of HRAs for success. We are tracking these changes carefully and will report back so we can share how these will help our small business clients. Stay tuned!