You’ve been waiting for it, and now it’s here.
The federal government has issued a final ruling directly affecting how health benefits can be offered.
The departments of Treasury, Health and Human Services and Labor have been working for over a year to craft this ruling which will drastically change how a Health Reimbursement Arrangement (HRA) can be used for businesses in America. The ruling adds two new HRA options, the ICHRA and Excepted Benefit HRA, for the 2020 calendar year.
What are the BIG changes in HRA world?
Big change 1: It’s called the Individual Coverage HRA (ICHRA) and is available to every business regardless of its size. Simply put, the ICHRA allows a business to offer its employees a monthly allowance of tax-free money to purchase individual health insurance. Employees purchase health care coverage specific to their needs, and their employer provides money to help offset the costs. Flyte has a solution which combines this new ruling into a single-stop solution called ICHRA Administration.
Big change 2: This new rule creates what’s called an Excepted Benefit HRA. An Excepted Benefit HRA is a Plan that allows an employer to offer a reimbursement for expenses associated with vision, dental and short-term medical insurance premiums.
Big change 3: Lastly, it allows an employee to enroll in individual coverage outside of national Open Enrollment, or during what’s called a special enrollment period (SEP). For simply being eligible to enroll in ICHRA, an employee is now within a Special Enrollment Period allowing them to enroll in the individual/family coverage that’s right for them.
So what’s the big deal?
Since the enactment of the Affordable Care Act (ACA), HRAs have been significantly limited in how they can be used by employers of all sizes. In short, an HRA could be integrated with a Group Health Plan, but using one to pay for individual health insurance was strictly prohibited.
Needless to say, this new rule disrupted the benefits plan of thousands of employers across the nation, and not in a positive way. If they were able to continue offering a benefits plan, they saw significant increases to their costs. Many simply stopped offering anything at all.
In contrast, prior to the PPACA, an employer could reimburse an employee for all or a portion of premiums towards an individual/family insurance policy. This was a common practice and for many employers, large and small, this was the only real option they had.
This new ruling not only restores these incredible options for thousands of employers, it actually creates some never before seen opportunities that we’ll explore later on.
The new rule, broken down!
As with most things healthcare-related, the ICHRA is made up of several parts that all work together to bring you and your employees value. Let’s dig in and take a look at the details:
ICHRA employee classes
The Agencies allow employers to determine eligibility based on several different employee classes. An employer can offer a contribution to one class and not another, or they can differ amounts from class to class. To keep things simple, an employer can even offer the same amount to all classes equally. Here are the classes identified in this new rule:
- Full-time employees
- Part-time employees
- Salaried employees
- Hourly employees
- Temporary employees of staffing firms
- Seasonal employees
- Employees covered under a collective bargaining agreement
- Employees in a waiting period
- Foreign employees who work abroad
- Employees in different locations, based on rating areas
- A combination of two or more of the above
Guidance on Age-Based Contributions
Although an employer can define their contribution based on age, they must ensure that their older employees would be eligible for a larger amount, but not exceed a certain ratio. To be more specific, the contribution for the oldest employee must be more than that of their youngest co-worker but cannot exceed more than three times the amount. For example, if an employer offers its 18-year-old employee $100 a month, it could only offer the oldest employee up to $300.
Rules regarding ICHRA classes sizes
If an employer wants to base their eligibility on a class of employees, each employee class must meet the specific criteria to be compliant. This size criteria varies by employer as follows:
- 10 employees for employers with fewer than 100 employees
- 10 percent of the total number of employees for employers with between 100 and 200 employees
- 20 employees for employers with more than 200 employees
Note: This section does not apply with temporary employees, collective bargaining agreements, seasonal employees, foreign nationals or those in a waiting period.
Verifying an employees’ insurance status
Any employee enrolling in the ICHRA must prove that they are enrolling in an individual policy before employer contributions can be distributed. Although most employers offer a monthly contribution, their employees are only required to provide proof of coverage on an annual basis. However, and seemingly in contradiction, the ruling required employers to verify their employees’ coverage status before any funds can be dispersed. This type of verification is possible in a variety of ways, including “self-attestation” by the employee.
Administering the ICHRA
Flyte HCM has designed a service product to specifically deliver on the promises of the ICHRA. ICHRA Administration is designed to facilitate a seamless way for employees to attest to their coverage and make the reimbursement process smooth.
What is the impact to your business?
With ICHRA Administration, small employers have a brand new set of choices to consider for their benefits offering. It is is a perfect fit for all employers regardless of size as the coverage is specific to the employees and the company no longer has to offer group insurance. Here are just a few of the great values of ICHRA Administration:
- Flexible around a large variety of employee types and need.
- ICHRA Administration allows employees to choose health insurance specific to them.
- ICHRA Administration is an ACA compliant solution for small and large employers.
- Reimbursements to an employee are tax-free.
- Enrollment in individual coverage is an integrated part of the ICHRA Administration process.
- Employers choose their own budget.
This great product comes with a variety of choices and plan design options. Contact our sales team for more information on how this can work for you!
Are you ready to take action?
If reading this has piqued your interest in ICHRA Administration, and you’d like to learn about how you can offer this great benefit, we have an excellent resource for you to explore:
Flyte HCM is proud to deliver a true multi-account solution for the ICHRA. A single platform, a debit card, and mobile app designed to make the ICHRA experience seamless and easy. For employers, we provide a comprehensive, one-stop, compliant administration solution with in-depth reporting, and a single administrator.
Curious and ready to learn more about how we can help your business? For more information, give us a call today or email: Sales@FlyteHCM.com