COST CONTAINMENT OPTION: EXPANDED HRA
A NEW WAY TO DELIVER BENEFITS
Individual Coverage Health Reimbursement arrangement (ICHRA) has several advantages over traditional group plans that may be appealing to some employers. For instance, the reimbursement model (sometimes called a “defined contribution”) gives employers greater ability to control costs and provides employees with more options to choose from. This is very different from the current model of group insurance (sometimes called a “defined benefit”) where employers must choose a one-size-fits all plan for the group and employees are limited to options sponsored by the employer.
In addition, ICHRA takes the burden of managing a health plan and underlying health risks off of the employer. Employers won’t have to manage renewals, worry about participation rates, stress about what doctor networks your employees want, or be surprised by annual premium increases. Instead, with ICHRA employers can decide which employees qualify, set their monthly allowances, and get back to managing their business while employees get to choose the plans they want.
Although it took awhile, congress finally addressed the problem. In December 2016, and passed the 21st Century Cures Act. The bill created the Qualified Small Employer Health Reimbursement Arrangement (QSEHRA), which again makes it permissible for small employers to reimburse for individual insurance as long as the employers (and employees) met several strict guidelines.
With QSEHRA gaining traction, the Trump Administration issued additional guidance to expand the use of HRAs. In October 2018, the U.S. Departments of the Treasury, Health and Human Services (HHS), and Labor proposed new regulations to expand the usability of health reimbursement arrangements (HRAs). The rules were finalized in June 2019 and created two new types of HRAs: the Individual Coverage HRA and the Excepted Benefit HRA.
For many employers, whether currently self-insured or fully-insured, they are effectively responsible for their employees’ healthcare spend. Self-insured employers will feel changes right away; fully-insured employers will feel it next year when their plan renews at a higher rate. Employers that prefer not try to manage employee healthcare spend, then an ICHRA could be a great option.
Another feature of ICHRA is that it can satisfy the employer mandate. Employers with 50 full-time-equivalent that have been stuck using complicated group plans to meet the mandate have a new, much simpler option with ICHRA!
The caveat is, the ICHRA has to be “affordable” to meet the mandate and clear the employer of any penalties. This makes sense, as otherwise employers could offer $1/mo and escape the penalty which would be unfair to employees.
*Optional but highly
The 21st Century Cures Act
January 1st 2020. On-going mandate
*When evaluating ICHRA vs a group plan for your organization, it’s important to analyze employees on a class-by-class basis. For example, some employees may prefer less hands on with their benefits, and be managed under the company sponsored group plan, but others may prefer more personal control, plan flexibility, value choice options and greater portability.