Risk & Business Magazine General Insurance Services Fall 2019 | Page 6

NEW EMPLOYEE BENEFIT
New Employee Benefit Option Coming in 2020:
INDIVIDUAL COVERAGE HRAS
BY: ERIC GIBSON, GROUP BENEFITS EXECUTIVE, GENERAL INSURANCE SERVICES
O
n October 12, 2017, President
Trump issued Executive
Order 13813—“Promoting
Healthcare Choice and
Competition Across the
United States”—which states in part that
the “Administration will prioritize three
areas for improvement in the near term:
association health plans (AHPs), short-
term, limited-duration insurance (STLDI),
and health reimbursement arrangements
(HRAs).”
The Executive Order further provides that
expanding “the flexibility and use of HRAs
would provide many Americans, including
employees who work at small businesses,
with more options for financing their
healthcare.”
BY: ERIC GIBSON
GROUP BENEFITS EXECUTIVE,
GENERAL INSURANCE SERVICES
Eric Gibson specializes in group
benefits for organizations of all sizes,
having been with GIS for nearly six
years. Outside of the office, Eric enjoys
spending time with his wife, Sidney, and
daughter, Zoey.
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Beginning in 2020, employers of all sizes
may implement a new HRA design—an
individual coverage HRA (ICHRA)—to
reimburse their eligible employees for
insurance policies purchased in the
individual market or Medicare premiums.
Final rules released by the Departments of
Labor, Health and Human Services (HHS),
and the Treasury permit employers to offer
an ICHRA as an alternative to traditional
group health plan coverage, subject to
certain conditions:
• Employers cannot offer any employee
a choice between an ICHRA and a
traditional group health plan.
• Covered individuals must be enrolled
in individual insurance coverage (or
Medicare coverage).
employees’ income and wages for federal
income and employment tax purposes.
On June 13, 2019, the Departments issued
final rules that expand the usability of
HRAs. Effective for plan years beginning
on or after January 1, 2020, the final
rules allow HRAs to be integrated with
individual insurance policies (or Medicare)
for purposes of satisfying the ACA’s
reforms.
This means that, effective for 2020, HRAs
may be used to reimburse employees for
the cost of individual health coverage (or
Medicare coverage) on a tax-free basis,
subject to certain conditions.
ELIGIBLE EXPENSES
BACKGROUND An employer may allow an ICHRA to
reimburse all medical care expenses, may
limit an ICHRA to allow reimbursements
only for premiums, may limit an ICHRA
to allow reimbursements only for
nonpremium medical care expenses
(such as cost-sharing), or may designate
specific medical care expenses that will be
reimbursable.
An HRA is a type of account-based group
health plan that is funded solely by
employer contributions and reimburses
eligible employees for medical care
expenses, up to a maximum dollar amount
for a coverage period. Although not required, it is expected
that most employers will use ICHRAs to
reimburse premiums for individual health
insurance coverage or Medicare (including
Medicare Part A, B, C, or D as well as
premiums for Medigap policies).
HRAs are an attractive option for
employers and employees due to their
tax-favored status. Employers may take
a federal income tax deduction for HRA
contributions. Any reimbursements that
employees receive from their HRAs for
medical care are excludable from the Enrollment Requirements
• Employers must generally offer the
ICHRA on the same terms to all
employees within a class of employees.
• Employers must provide an annual
notice to covered employees.
An employee who is covered by an ICHRA
must be enrolled in individual health
insurance coverage (or Medicare coverage)
for each month that he or she is covered
by the ICHRA. For example, individual
insurance coverage includes: