New Rule Allows Health Reimbursement Accounts to be Used for Individual Coverage

Remember how Health Reimbursement Accounts (HRAs) had this restriction on them that they couldn’t be used by employees to purchase individual health insurance?  Well, that was true…last week.  

But now, the U.S. Departments of the Treasury, Labor, and Health and Human Services (tri-agencies) have issued a final rule allowing employees to use the dollars in employer-funded Health Reimbursement Arrangements (HRAs, also called Health Reimbursement Accounts) to purchase individual coverage both on and off the public Marketplace (or Exchange). 

So here are the details. Beginning Jan. 1, 2020, employers can offer individual coverage HRAs (ICHRAs) to provide tax-exempt dollars to their employees for the purchase of Affordable Care Act (ACA)-compliant individual coverage, but not the less comprehensive, short-term, limited duration insurance (STLDI) coverage. Under the final rule:

Employees can use ICHRA funds to pay the premium for individual insurance coverage purchased either on or off the public Marketplace.

Employers can offer their employees either a group health plan or an ICHRA, but not both.

Offering an ICHRA will satisfy the Section 4980H Employer Mandate, if it meets the affordability threshold.

Employees can opt out of an ICHRA if they are eligible for premium tax credits on the public Marketplace.

Employers are required to make the ICHRA available to entire “classes” of employees (e.g., full-time, part-time, or seasonal workers).

In response to comments received on the proposed rule, the final rule includes a minimum class size requirement based on employer size. (For all of the details, read the full story below) 

Staying on top of the ever-changing health insurance rules landscape is just another way we help you rule your world!  If you have any questions about this or anything involving your company’s health plans or employee benefits, please let us know! 

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