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Final Individual Coverage HRA Rule Released

By: Andrew Silverio, Esq.

Recently, the Trump administration released a finalized rule establishing the conditions under which employers can utilize HRAs to subsidize their employees’ purchase of individual coverage, including coverage on the Exchange.

Under the rule, employers are able to provide enrollees with a fixed dollar amount, tax exempt, which can be used to buy individual coverage.  While the rule doesn’t relieve the employer’s obligations to provide group coverage, if applicable, participation in the individual coverage HRA is conditional upon having individual coverage, which includes Medicare.  This requirement is applicable for the employee and any dependents.  Additionally, the individual coverage must satisfy certain requirements to qualify under the rule, allowing an individual to utilize the ICHRA, and individuals must attest that they have suitable individual coverage.

Notably, the model notice and attestation (available at https://www.cms.gov/CCIIO/Programs-and-Initiatives/Health-Insurance-Market-Reforms/Downloads/HRA-Model-Notice-PDF.pdf and https://www.cms.gov/CCIIO/Programs-and-Initiatives/Health-Insurance-Market-Reforms/Downloads/HRA-Model-Attestations-PDF.pdf) provided by the administration contain no disclosure or explanation that certain coverage, such as certain limited-benefit plans or health sharing ministries, would not satisfy the rule’s requirements relating to the suitability of other coverage.

Critics of the rule have pointed to a few plausible factors in arguing that it will raise the price of individual coverage in the exchanges, both by incentivizing sicker employees within a workforce and employers with sicker employee populations overall to feed high risk lives into the individual markets.  Additionally, it has been noted that older participants may not benefit sufficiently from the ICHRAs, because the limitations on how much the contribution amounts can differ based on age will be insufficient to compensate for the naturally disproportionate premiums those participants will encounter in the individual market.

Finally, the content of the rule aside, the quick turnaround time of a 01/01/2020 effective date is leaving state marketplaces scrambling, with many saying it will be simply impossible to implement sufficient changes in just a few months to be equipped to manage enrollment accurately under the new rule.

This is a significant development, with implications in the ACA, tax code, employment law, and other fields.  Court challenges are likely, but as of now the rule stands to go “live” in just a few months.  Reach out to The Phia Group at PGCReferral@phiagroup.com with any questions or for more detailed information on any of the rule’s contents.