The Individual Coverage HRA (ICHRA) will be available in January of 2020, which means that employees will select and purchase their own health insurance and employers will reimburse them tax-free. The freedom to choose your own plan is beneficial for many reasons, but remember that there are some requirements (like Minimum Essential Coverage) if you are planning on participating in your company's ICHRA.
What is Minimum Essential Coverage?
With all of the changes coming our way in the world of healthcare, let’s review and clarify some terms. Starting in 2014, the individual shared responsibility provision instructed everyone to obtain minimum essential health coverage - otherwise known as “minimum essential coverage” (MEC.) The minimum essential coverage must be met each month, or the individual must qualify for an exemption. If you didn’t have insurance that met MEC requirements, you were to pay a fine, called the Individual Mandate.
The Trump administration repealed the Individual Mandate. So what does this mean? Beginning January 2019, the penalty has disappeared. Now, if you don’t have full health coverage each month, there's no fine to pay. But here’s where it gets a little confusing. The mandate still technically exists - the penalty has just been set to $0. The IRS will still ask if you have insurance, but it will not require a response.
There are different options you can purchase MEC through here.
Some other options are listed below:
- Coverage purchased in the individual market, including a qualified health plan offered by the Health Insurance Marketplace (also known as an Affordable Insurance Exchange)
- Medicare Part A coverage and Medicare Advantage (MA) plans
- Most Medicaid coverage
- Children's Health Insurance Program (CHIP) coverage
- Certain types of veterans health coverage administered by the Veterans Administration
Do you need Minimum Essential Coverage to participate in ICHRA?
Short answer: Yes, you (and any dependents) need minimum essential coverage to qualify for your employer’s ICHRA.
Even without the individual mandate's high fines from years' past, you have to maintain MEC in order to participate in your company's ICHRA. This ruling has been clearly defined in the information that has come out so far about the new laws and will work just like QSEHRA and MEC.
If you already have a major medical plan, then you have MEC! If you don't, or are planning on using a sharing ministry like Medi-Share, you'll need to sign up for an MEC plan that covers the basics. Here's a good resource for finding these "lite" MEC plans to meet the requirements of ICHRA.
We are just as excited as you are to find out what will happen with these proposed HRAs now that the comments period has closed. 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’re busy tracking these changes carefully and will report back so we can share how these will help our small business clients.