With 2020 in full swing, employers and human resources professionals across the U.S. are bounding into the year with a new economic outlook—and new benefits regulations to match.
For many business leaders, this means adjusting benefits strategies to stay up-to-date, and to take advantage of new ways to offer employees flexible coverage. One topic causing the biggest stir is the introduction of individual coverage health reimbursement arrangements (ICHRAs), a new regulation effective January 1, 2020.
You’re likely already familiar with health reimbursement arrangements (HRAs), a popular means to support employees in funding health expenses such as prescriptions, dental exams, and eyeglasses. Yet as HR professionals know, there’s always room for one more acronym in our repertoire! So, how does the “individual coverage” designation expand on this coverage?
Here’s what you need to know to make the most of Individual Coverage HRAs in 2020:
What are Individual Coverage HRAs and how do they work?
Traditional HRAs have been used to support employees in covering general medical expenses, but not healthcare coverage. In the past, for HRAs to be used to fund individual coverage, COBRA, or retiree healthcare premiums, employers needed to offer a Qualified Small Employer HRA (QSEHRA), which were available exclusively to those employers with 50 or fewer employees. As of January 1, 2020, Individual Coverage HRAs expand that ability to all employers, by offering the ability to support funding employees’ healthcare coverage specifically.
In execution, employers create an ICHRA account for each eligible employee and define the amount to which they’ll fund the account. Employees then purchase healthcare coverage on the open markets and use the funding in the ICHRA account to pay for all or part of the premium.
What should I know about the new regulations?
ICHRAs can be used for a variety of employee types including, part-time, seasonal and temporary employees of staffing firms. ICHRA regulations allow employers to create different classes of employees for the purpose of offering ICHRAs, and the funding for these groups can vary. This allows you to be strategic about ICHRAs and customize them to your needs as an employer. Employers have a high degree of control over the execution of ICHRAs, as there is no minimum required funding amount and no ceiling. However, it's important to note that there is a minimum level of funding required to be considered an "affordable" healthcare option under the ACA.
Why are these regulations best suited to non-traditional workers?
In the past, employers were limited in their ability to offer healthcare benefits to employees who weren’t full-time. ICHRAs aim to change that. Employers can now offer funding to part-time or seasonal employees to help them pay for health care benefits on the open market. Since these workers are more likely to have multiple sources of income than full-time employees, ICHRAs offer an attractive level of flexibility that’s not constrained by an employer’s healthcare plan design.
What benefits do ICHRAs offer my organization?
In a labor market characterized by an unemployment rate of just 3.6%, it’s a sellers’ market, so to speak. Employers face challenges in differentiating themselves and attracting the most qualified employees for open positions. With an ICHRA offering, employers have another way to demonstrate their value to a wider range of workforce segments.
When it comes to the bottom line, ICHRAs have a benefit for employers, too. They loosen the requirement that employers absorb all annual premium increases in healthcare coverage and help distribute that risk into a cost-sharing model with employees. This newfound predictability gives employers the opportunity to plan benefits budgets with more insight, opening up revenue to cover rising costs each year.
How should I communicate these changes to employees?
It’s important to ensure that ICHRAs don’t add another level of complexity to benefits offerings. We recommend giving ICHRAs a dedicated section within your employee manual and benefits booklet, especially those distributed to new and non-traditional employees. For this first year especially, a single-page insert with FAQs answered could help strengthen the message. It’s never a bad idea to send around an all-company email to highlight this new regulation, and consider how you can tailor communications to part-time or seasonal hires. Personalized messaging is a great way to let these employees know about their new ICHRA options.
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