HealthCare.gov Team Explains How ACA Subsidy Rules Apply to HRA Users

Federal regulators want to help agents and brokers sell Affordable Care Act public exchange plan coverage to consumers who are using two relatively new “cash for coverage” programs.

Resources

• The CMS slidedeck about ACA exchange users who have health reimbursement arrangement is available here.
• An article about birth of the ICHRA market is available here.

The regulators have developed a slidedeck that explains what happens when a consumer who needs individual coverage come to a producer with a qualified small employer health reimbursement arrangement (QSEHRA) or an individual coverage health reimbursement arrangement (ICHRA).

Health Reimbursement Arrangement English

Just five years ago, a health reimbursement arrangement (HRA) was the quiet older sister of the health savings account. An employer could put an unlimited amount of cash in an HRA, and an employee could use that cash with low-deductible, or no-deductible health insurance. But the employee did not actually own the HRA, and the employee could not legally use the HRA cash to pay for individual health coverage.

Congress created the first major cash-for-coverage HRA program, the QSEHRA program, with a provision in the 21st Century Cures Act of 2016. The QSEHRA program came to life Jan. 1, 2017. The program gives employers with up to 50 full-time employees a flexible way to provide cash employees can use to buy their own individual coverage.

The Trump administration used regulations to create the ICHRA program in mid-2019, which  started on Jan. 1, 2020. That program gives employers of all sizes, that meet antidiscrimination and other requirements, a way to give employees cash for coverage.

Workers with QSEHRAs or ICHRAs can use the HRA money to buy individual health coverage inside or outside the ACA public exchange system. In some cases, workers who use QSEHRA or ICHRA money to buy ACA exchange plan coverage may qualify for ACA premium tax credit subsidies.

The CMS Slidedeck

Staff members at the Centers for Medicare and Medicaid Services (CMS) — the arm of the U.S. Department of Health and Human Services (HHS) that helps HHS administer Affordable Care Act rules and programs — have used the new slidedeck to explain how the QSEHRA and ICHRA rules interact with the ACA exchange program rules.

The staffers, for example, talk about when workers can use Section 125 cafeteria plans to pay part of their health insurance premiums; what happens when workers with affordable ICHRAs apply for exchange plan coverage; and what happens to workers who get ICHRAs or QSEHRAs in the middle of a calendar year, outside of the period when people usually sign up for exchange plan coverage.

One scenario in the slidedeck features Joe, a married man who has one dependent, an annual household income of $75,000, an ICHRA plan that provides $500 in employer ICHRA cash per month, and the ability to buy self-only, silver-level coverage from an ACA public exchange for $798.25.

Joe must pay $298.25 per month to buy the silver-level coverage.

Because the government classifies that self-only coverage as being affordable,  Joe cannot qualify for ACA premium subsidy help,

Because Joe’s employer’s ICHRA does not reimburse employees for dependents’ expenses, Joe’s wife and dependent are eligible to use an ACA premium tax credit subsidy to pay for exchange plan coverage.

The slidedeck shows readers what kinds of screens HealthCare.gov would show Joe to help him understand his HRA.

Some states, including California and New York state, have their own, locally run ACA exchange programs. The CMS slidedeck does not show the reader what the state’s Covered California exchange website or other locally run exchange websites tell consumers about HRAs.

The slidedeck does offer a collection of “additional resources” links at the end. The resources include a link to an HRA information and decision guide, an ICHRA guide, a QSEHRA guide, and an ICHRA model employer notice.

— Read Some State Health Markets Tilt More Toward ICHRAs: Vericred, on ThinkAdvisor.

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