Individual coverage HRAs
Starting in 2020, federal regulations on Health Reimbursement Arrangements were loosened. Individual Coverage Health Reimbursement Arrangements (ICHRAs) are now allowed. Basically, that means that an employer can choose to offer an ICHRA as a reimbursement tool for their employees to purchase health insurance on the individual market, rather than offering a traditional group plan. In some cases, the employee may be able to pay their premiums pre-tax, using a Section 125 arrangement through the employer.
This allows the employee to choose any plan available to them, either on or off the marketplace. The employer then will reimburse either a flat amount or a percentage of premium back to the employee. The amounts are set by the employer in the beginning of the ICHRA year.
Being offered an ICHRA may disqualify you from being eligible for tax credits. However, this depends on the amount of reimbursement offered to you compared to the cost of a benchmark plan in your zip code.
Currently, brokers and insurers are awaiting further instruction from the Colorado Division of Insurance on how those ICHRA rules will be regulated on a state level. We are hoping for more information by summer 2020.
ICHRAs are complex, so if this is something you’re interested in offering your employees, or if your employer has offered one to you, you’ll want to work with an experienced broker to figure out your options. Contact us so we can discuss in more detail.