450 / How does the use of an individual coverage HRA impact the employee's ability to claim the premium tax credit?

Employees who receive integrated individual coverage via an HRA are generally not eligible for the premium tax credit, but they are eligible for a special enrollment period in the individual market to purchase health insurance. While the general enrollment period in the marketplace occurs in November and December, the regulations provide that a special enrollment event will be deemed to occur when an individual is given the option of participating in an individual coverage HRA.

Despite this, individual coverage HRAs are treated as group health insurance plans under the ACA. This means that if the employee chooses to opt out because the coverage provided is not affordable and then enrolls in individual coverage via the health insurance marketplace, the individual may remain eligible to claim the premium tax credit. An individual coverage HRA is affordable for purposes of claiming the premium tax credit if the employee's required HRA contribution does not exceed 1/12 of (1) the employee's household income for the year multiplied by (2) the required contribution percentage.¹ The employee's "required contribution" is determined by subtracting (1) the monthly premium for the lowest cost silver plan for self-only coverage of the employee offered on the health insurance exchange for the rating area in which the employee lives from (2) the monthly self-only HRA contribution. For 2027, the required contribution percentage is 10.22% (996% in 2026, 9.02% in 2025, 8.39% in 2024, 9.12% in 2023, 9.61 percent in 2022, 9.83 percent in 2021 and 9.78 percent in 2020).

If the individual coverage is deemed to be unaffordable at the time the employee enrolls in individual coverage through the marketplace after opting out, the individual coverage HRA will be deemed unaffordable for the entire year.²