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The Advantages for Health Saving Accounts (HSAs): Employees find balance between health and wealth
The Advantages fo Health Saving Accounts (HSAs): Employees find balance between health and wealth
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On Thursday, June 13, 2019, the U.S. Departments of Health and Human Services, Labor and Treasury issued a final rule that creates two new kinds of Health Reimbursement Arrangements (HRAs) effective for January 1, 2020 plan start dates:
These HRA rules are intended to provide businesses, especially those with a high turnover rate of part-time employees, a better way to offer health insurance coverage so that millions of workers and their families can obtain the best coverage for their needs and recruit and retain talent in a tight talent market.
The ICHRA has been developed to help employers provide an alternative to traditional health coverage since many struggle with affordability. Contributing to an ICHRA can allow employers to offer a subsidy to offset the cost of an employee’s individual health coverage. Also, the EBHRA has been developed to benefit the growing number of employees who have opted out of their employer’s coverage.
At Alight, our priority is to make it simple for our health solutions clients to make smarter healthcare choices every day. Our enrollment solutions and Alight Smart-Choice Accounts™ reimbursement platform will fully support the account administration for these types of HRAs.
Individual coverage HRA
Employers of all sizes can offer an ICHRA in lieu of traditional group health plan coverage for all or certain classes of employees. To enroll in the ICHRA, employees must purchase ACA-compliant health insurance in the individual market, which could include insurance purchased in the public exchanges.
If employers choose to offer this new ICHRA benefit in 2020, they will need to act soon to provide sufficient, required advance notice. Employees who choose to take advantage of an ICHRA in the new year must enroll in an individual health plan during the fall open enrollment period.
Considerations for employers exploring this new ICHRA benefit:
Excepted benefit HRA
The EBHRA will increase flexibility for employer-sponsored group health plans. An EBHRA can be offered in addition to a traditional group health plan to permit employers to finance up to $1,800 (pre-tax) of additional medical care (such as copays, deductibles or premiums for vision, dental, COBRA and short-term insurance coverage), even if the employee has declined enrollment in the traditional group health plan.
Considerations for employers exploring this new EBHRA benefit:
Is this a fit for my organization?
Many employers are questioning whether these new HRA options are right for them. Employers should consider whether the following applies:
If you checked any of the boxes above, your organization may want to explore the new HRA options and Alight can partner with you to deliver your strategies. We see a lot of potential for employers to take advantage of these new rules and we are ready to help. Contact us today if you have questions or would like to learn more about the new rules.
Additional Resources for more information:
U.S. Department of Labor — U.S. Departments of Health and Human Services, Labor, and the Treasury Expand Access to Quality, Affordable Health Coverage through Health Reimbursement Arrangements
Federal Register — Health Reimbursement Arrangements and Other Account-Based Group Health Plans
We've answered some of the most commonly asked questions.
Our enrollment solutions and Alight Smart-Choice Accounts™ reimbursement platform will fully support the account administration for these types of HRAs.
ICHRAs can help enable businesses to focus on what they do best— serve their customers —and not on navigating and managing complex health benefit designs. ICHRAs provide tax advantages because the reimbursements provided to employees do not count toward the employees' taxable wages. In effect, ICHRAs extend the tax advantage for traditional group health plans (exclusion of premiums and benefits received from federal income and payroll taxes) to HRA reimbursements of individual health insurance premiums.
An EBHRA will benefit the growing number of employees who have been opting out of their employer's traditional group health plan because the employee's share of premiums is too expensive.
There may be scenarios in which employers wish to offer an EBHRA in addition to a traditional group health plan, for example to help cover the cost of copays, deductibles, or non-covered expenses. EBHRAs generally allow for higher levels of employer contributions than health flexible spending arrangements (FSAs) and can permit rollover of unused amounts from year to year.
To qualify as an EBHRA:
ICHRAs must provide a notice to eligible participants regarding the terms of the ICHRA and how it affects eligibility for a premium tax credit in the public marketplace. Employees must also be permitted to opt out of an ICHRA at least annually so they may claim the premium tax credit if they are otherwise eligible. The ICHRA must also have reasonable procedures to substantiate that participating employees and their families are enrolled in individual health insurance or Medicare, while covered by the ICHRA both at initial enrollment and with each request for reimbursement of expenses.
Employers generally will not have any responsibility with respect to the individual health insurance itself that is purchased by the employee, because it will not be considered part of the employer-sponsored plan, provided: