Feds Explain Cash-for-Coverage HRA Details

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Federal officials are trying to help agents and brokers understand how the new individual coverage health reimbursement arrangements (ICHRAs) might work in the real world.

Officials from the Center for Consumer Information & Insurance Oversight (CCIIO) — the agency directly in charge of HealthCare.gov — held a webinar last week to explain what will happen if workers eligible for ICHRAs apply for individual coverage through an Affordable Care Act (ACA) public exchange program.

(Related: UnitedHealth Could Add Individual Policies Aimed at HRA Market: CEO)

CCIIO officials gave general information about HRAs and the ICHRA program.

Officials also discussed ICHRA quirks, such as the special enrollment period for individual coverage that employees will get when they learn they’re in an ICHRA program, and how an ICHRA will work for an employee who has dependents.

The ICHRA

HRAs appeared before health savings accounts (HSA), and, in some ways, they resemble HSAs.

An employer can use either an HRA or an HSA to feed pretax cash into individual accounts for each employee. Employees can use the account value in either an HRA or an HSA to pay for eligible health care products and services.

One difference is account value ownership. Under federal law, an employee owns the cash in an HSA. The employer owns the cash in an HRA.

Another difference has to do with benefit plan designs: An employee must use an HSA together with high-deductible coverage. An HRA user can combine an HRA with low-deductible health coverage, or no-deductible coverage.

Before the ACA came to life, some employers used HRAs to give employees cash that the workers could use to buy their own coverage. One obstacle was that pre-ACA medical underwriting often kept employees with health problems from buying individual coverage.

When the ACA ban on use of personal health information in underwriting took effect, in 2014, employees with health problems could buy individual coverage for the same price that healthy employees paid. That made the idea of using cash-for-coverage HRAs feasible.

Officials in the administration of former President Barack Obama feared that cash-for-coverage HRAs could destabilize the traditional health coverage market. Obama administration officials adopted regulation interpretations that made offering cash-for-coverage HRAs impractical.

The Trump administration completed work earlier this year on final regulations that clear away the Obama-era restrictions on cash-for-coverage HRAs. The new cash-for-coverage HRA program, the ICHRA program.

An employer with an ICHRA program must comply with many rules meant to prevent discrimination against sicker or older workers. An employer that wants to offer ICHRAs cannot, for example, combine ICHRAs with offers of traditional group health coverage. But, an employer that complies with those rules can put an unlimited amount of cash in an ICHRA for the eligible employees. The employees must use the cash to buy individual coverage.

It’s not clear how easily employers will be able to set up ICHRA programs in time for the programs to start Jan. 1, 2020.

Some compliance analysts have suggested that, even after insurers and administrators have had more time to implement ICHRA programs, the ICHRA antidiscrimination rules will scare off most employers.

But the Trump administration has predicted that as many as 800,000 employers could use ICHRA programs to provide cash for coverage for about 11 million people.

Some vendors are already offering tools and services aimed at the ICHRA market. (See the slideshow above. Wiggle your pointer over the first slide to make the control arrows show up.)

What CCIIO Officials Said

1. Enrollment Timing

For people in most of the country, the ordinary open enrollment period for individual major medical insurance runs from Nov. 1 through Dec. 15 every year.

One question for employers interested in ICHRAs has been how employees will apply for coverage if an employer’s ICHRA program starts up outside the individual major medical insurance open enrollment period.l.

CCIIO officials said employees of ICHRA program sponsors who learn they have an ICHRA will get a “special enrollment period” (SEP), or chance to sign up for individual coverage outside the regular enrollment period.

“The triggering event is the first day on which coverage for the qualified individual, enrollee, or dependent under the ICHRA can take effect,” officials said.

2. The SEP Process

Because the ICHRA SEP is new, the ICHRA SEP option will not be included in the HealthCare.gov web application for 2020 that’s about to open for business next Friday, officials said.

Instead of simply using the HealthCare.gov website to sign up for ICHRA SEPs, eligible workers will have to call the HealthCare.gov call center on the phone to get help, officials said.

ICHRA SEP applicants will have to provide documentation that they’re eligible for SEPs, officials said.

3. Single Employees and Employees With Dependents

CCIIO officials discussed five scenarios. Four starred an employee named Jane, and a fifth starred Tom.

If, for example, under federal rules, Jane had an ICHRA, but her own share of the premiums for individual HealthCare.gov coverage would be unaffordable, she could opt out of using the ICHRA and instead buy coverage using the regular ACA premium tax credit subsidy.

If, in another scenario, Jane had a spouse and a child, and her individual coverage would be classified as affordable, she could have to use her ICHRA and her own cash to pay for coverage. She couldn’t switch to using ACA premium tax credit help to pay for coverage.

Resources

A link to the ICHRA guide is available here.

— Read New Final HRA Regs Could Help Brokers Reach Employees, on ThinkAdvisor.

— Connect with ThinkAdvisor Life/Health on Facebook, LinkedIn and Twitter.

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