Individual Coverage HRA FAQs
Federal regulators recently released the final rules for two new types of HRAs. The 497-page document outlines the new Individual Coverage HRA (ICHRA) and Extended Benefits HRA (EBHRA) set to take effect on January 1, 2020. Our goal is to help you stay on top of the latest news and how it might impact you.
We envision the target businesses to be between 20 and 200 employees who have traditionally offered employer-sponsored plans.
The proposed rules would require that several conditions be met for the Individual Coverage HRA to work:
Individual employees (and their dependents) must be covered by a health insurance plan
The design of the HRA does not intentionally or unintentionally discriminate (to prevent risk shifting)
Employees in the same "employee class" are offered an HRA on the "same terms"
The Individual Coverage HRA is designed to help employees pay for individual health insurance premiums. In addition, it can also help pay for medical expenses provided that the employee has substantiated his or her has health insurance coverage. This is similar to the rules in effect governing QSEHRA.
Full-Time Employees: A business can define whether this means 30 hours or 40 hours a week, but keep in mind that to satisfy the employer mandate, it will need to be at least 30 hours a week.
Part-Time Employees: This can be defined as either less than 30 or less than 40 hours a week.
Seasonal Employees: This one is what it sounds like. Employees are hired on a short-term basis or a season.
Employees covered by a collective bargaining agreement: This signifies a written agreement between an employer, employee, and their trade union on the basis of employment, pay rate, work hours, and other working conditions.
Employees who have not satisfied a waiting period: This is pretty standard practice when new employees come on board. Businesses can choose up to 90 days before an employee’s health benefits kick in.
Employees located in the same geographic area: Typically the geographic location is located within the same insurance rating area, state, or multi-state region.
Non-Resident aliens with no US-based income: These include employees who work outside of the country.
Salaried Employees: Employees who receive a salary as wages.
Non-Salaried Employees: Such as hourly workers.
Temporary Employees: Employees of staffing firms.
Custom Classes: Combine two or more of the above to create a new class, like remote, part-time employees. ICHRA gives employers more freedom to design a plan that suits their needs best.
One of the biggest points of confusion (and opportunity!) for this new HRA is the issue of affordability as it relates to premium tax credits and satisfying the employer mandate. The main takeaway is that ICHRA satisfies the mandate if it is affordable. If it’s not affordable, the employee can opt out and receive premium tax credits instead. It’s still up in the air on what affordability means. Check back soon for details!
There are also some built-in safe harbors to help the ICHRA be more practical and less administratively burdensome for large employers. CLICK HERE to read our guide and learn more about the safe harbors.
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