As we reported in our January blog, there’s a new type of tax-deferred account on the horizon. The new accounts – called Individual Coverage HRAs (ICHRAs) – will allow employers to put money in an HRA that employees can use to purchase their own health insurance on the individual market. Unlike their cousin, the Qualified Small Employer HRA (QSEHRA), ICHRAs may be offered by employers of any size.
While final regulations authorizing the new ICHRAs have an effective date of January 1, 2020, it remains to be seen whether it’s feasible for employers to put one in place by then. Potential obstacles include:
- In the Kansas City area and many other states, there is no “individual market” outside of the ailing federal Health Insurance Marketplace. (Regulators say the new HRAs will help fix that.) Employers will want to make sure that their employees will actually be able to get individual coverage with the HRA money provided.
- The regulations identify at least three areas where additional guidance will be needed: 1) the ability of employers to contribute more to individual HRAs for older employees (because individual coverage for them would be more expensive); 2) how ICHRAs interact with Medicare Secondary Payer rules; and 3) how to structure an ICHRA to satisfy (and therefore avoid penalties under) the ACA’s employer mandate.
In the current tight labor market, most employers will want to think long and hard before dropping their health insurance offerings in favor of an ICHRA. This perceived rollback of benefits offerings could seriously impede your recruitment and retention efforts. One possible exception? For employers that don’t currently offer any health benefits but want to, the HRA may be a relatively inexpensive and simple solution.
We will be providing a more comprehensive analysis of the new rules in the coming weeks. In the meantime, feel free to contact me with any questions you may have.
By Julie Athey, Director of Compliance, The Miller Group