Health coverage is a key benefit employers offer workers in order to attract and retain the best and the brightest. Yet employers face numerous complex regulatory rules and administrative burdens in providing health coverage to their employees. Most big employers have entire departments devoted to understanding the rules and administering health coverage. But, many smaller business owners don’t have that luxury. They alone must take on the task of navigating how to provide health coverage to their employees.
This year, the Trump Administration took a big step forward in doing just that by issuing new rules expanding Health Reimbursement Arrangements (HRAs). HRAs are employer-funded accounts that workers can use to pay for health insurance premiums or medical expenses. Employees can spend the money in their HRA accounts on insurance policies they may prefer outside the workplace. The funds are tax free to both the employer and employee.
Under the new rules, employers can offer an “individual coverage HRA” that gives workers and their families the ability to use tax-free employer dollars to pay for individual health coverage.
This means that, for the first time, employers of all sizes can set up tax free accounts that their workers can use to buy their own health plans on the individual market and get the same tax benefits as traditional employer-sponsored group health plans. The end result is simple: employees get new flexible healthcare coverage options, while employers can focus less on managing mounds of paperwork and more on what they do best—serving their customers and growing their businesses.
Employers can start offering individual coverage HRAs beginning January 1, 2020, that will allow employees to shop for and select a plan during this year’s upcoming Health Insurance Exchange Open Enrollment Period, which starts on November 1, and ends on December 15, 2019.
If employers aren’t quite ready for January 1, they can instead offer an individual coverage HRA that starts in the middle of the calendar year, and their employees can enroll in individual market coverage through a special enrollment period. Throughout the year, employees who are newly hired and offered an individual coverage HRA can also use this special enrollment period to get individual coverage.
To help employees understand their individual coverage HRAs, employers must give employees a notice 90 days in advance that includes key information about their HRA offer.
To make this easier, CMS designed a downloadable tool to help employers decide whether to offer an individual coverage HRA. This tool, released today, will give employers access to health insurance premium data by geographic location.
The tool provides specific rate information for the least expensive plan in a certain category (the “lowest cost silver plan”) based on an eligible employee’s age and geography. Employers can use this tool in deciding the funding level for an individual coverage HRA. In particular, large employers, who are subject to the ACA’s employer mandate requirements, can use this tool to determine whether their offer of coverage through an individual coverage HRA would be considered affordable based on standards established in the new HRA rules.
Allowing employers to fund individual market coverage for their employees through HRAs, gives employees an incredible amount of control over their healthcare while at the same time keeping the employer involved as a strong partner in maintaining coverage.
To access the tool through the CMS website, click this link: https://www.cms.gov/blog/how-health-reimbursement-agreements-hras-help-employers-expand-coverage-options-their-employees
For more information on the new HRA rules and how they can help employers and their workers, click here: https://www.cms.gov/CCIIO/Programs-and-Initiatives/Employer-Initiatives/Downloads/PH19-HRA-Tool-Data-Dictionary.pdf
Have questions about any of these topics? Contact us here at Total Benefit Solutions, Inc at 215-355-2121. We are here to help you understand all your options and help you choose the best fit for you and your Employees.