Individual Coverage HRA (ICHRA) basics for ACA Agents
Individual Coverage Health Reimbursement Accounts (ICHRAs) are a relatively new option in the health insurance landscape. Since January 1st, 2020, employers can offer ICHRA coverage to their employees instead of traditional group health insurance plans.
Through an ICHRA, the employer gives tax-free dollars to eligible employees who then choose their own individual plan through the Marketplace. These new plans are gaining momentum because they can be a win-win for employers and employees: the former gets to control their health spending costs, while the latter gets to choose the health insurance coverage that best fits their needs.
As an ACA agent or broker, it’s important to understand the opportunity available as more employers adopt ICHRA coverage. Continue reading to learn the basics of how these new plans work and how you can enroll these employees into ICHRA-compatible coverage through a free HealthSherpa for Agents account.
For more information, you can check out our ICHRA guide for employers, brokers and benefits professionals.
What is an Individual Coverage Health Reimbursement Account (ICHRA)?
An ICHRA allows employers to reimburse their employees for individual coverage insurance premiums (and if they choose, health care expenses) in place of offering them a traditional group health plan.
ACA agents should know that an employer cannot offer group coverage and an ICHRA to the same employee. When an employer sets up ICHRA coverage for their employees, they can offer group coverage to some and ICHRA to others by separating their headcount into classes of employees (e.g. full-time employees, part-time employees, salaried employees, employees covered by a collective bargaining agreement, seasonal employees etc).
These employees must enroll in qualifying individual coverage (e.g. Qualified Health Plans or Medicare) to use their ICHRA dollars.
What counts as Individual Coverage?
The employee must enroll in a Qualifying Health Plan or Medicare Part A (Hospital Insurance), Part B (Medical Insurance), or Part C (Medicare Advantage) each month they are covered by the ICHRA. Short-term health insurance and healthcare sharing ministries do not fulfill the requirements for an ICHRA and a client will not be able to use their employer’s allowance on these products.
Any employee under the age of 65 who is offered an ICHRA plan could be a prospective ACA client for you.
How does an ICHRA work?
Once an employee enrolls in a plan, the employer chips in a set dollar amount of their choosing to help off-set the cost of premiums and (if the employer chooses) the cost of medical care. The allowances given to employees through an ICHRA are all tax-free for both the employer and the employee.
How would an agent know that their client is eligible for an ICHRA?
The employer should have sent a notice to your client offering an ICHRA, and it should include what is being offered and whether the offer extends to other household members. Here’s an example from the DOL.
It’s important for ACA agents to review the notice since ICHRAs afford employers a lot of flexibility on what they will and will not cover. For example, an employer can choose the reimbursement amount, whether family members are covered, when the ICHRA plan year starts and ends, and whether the ICHRA can be used towards medical expenses.
Are there any key differences between a standard ACA enrollment and an ICHRA?
Yes — a client can either use the ICHRA or get subsidies, which includes advance premium tax credit (APTC) and cost sharing reductions (CSR). They cannot receive both.
By law, employers with 50+ employees are required to give all qualifying full time employees enough money in their ICHRA so that a benchmark plan on the Marketplace is considered affordable. Employees who don’t qualify for full-time health benefits can also be offered an ICHRA, but it does not need to meet an affordability standard by law. The next question will cover how agents would be able to determine the affordability of an ICHRA.
It is completely possible that enrolling in an ACA plan and receiving subsidies is a more affordable option for employees. As an ACA agent, you will have more visibility into the employee’s household income and be able to determine whether the client’s ICHRA is affordable.
How does an agent determine whether their client’s ICHRA is affordable?
The HealthSherpa application bakes in the following calculation — so this can be determined directly on our site. We recommend using our ICHRA affordability calculator to get an instant affordability report and understand what ICHRA contributions are necessary for you to meet the Affordable Care Act’s affordability thresholds for employers.
Here’s the definition: For 2020, an ICHRA is considered affordable for an employee if the monthly premium of the self-only lowest – cost silver plan (LCSP), minus the monthly amount made available to the employee under the ICHRA, does not exceed 9.78%* of the employee’s monthly household income.
See the diagram below for a visual representation.
Note: There’s a similar HRA for small businesses with under 50 employees called the Qualified Small Employer HRA (QSEHRA). In this setup, the three big differences are:
(i) There is a limit on how much employers can contribute
(ii) Employees can use their QSEHRA and get APTC/CSR, but the amount of subsidy received will be reduced by the amount of the QSEHRA.
(iii) QSEHRA dollars can be used for some other kinds of MEC, including spousal group coverage.
Agents can enroll these clients on HealthSherpa, but at the moment there is no affordability calculation like there is for ICHRAs. These questions still need to be set by the Department of Health and Human Services, so this doesn’t exist on Healthcare.gov or for other EDE partners either.
How can ACA agents enroll their clients in ICHRA plans through HealthSherpa?
In the ‘Additional questions > Coverage’ section, the agent will be able to select that someone in the client’s household is being offered an ICHRA.
From there, the agent will need to fill out:
(i) When the ICHRA will begin
(ii) Which employer is offering the ICHRA
(iii) The max self-only amount of reimbursement offered by the employer & frequency of contributions.
(iv) Employer contact information
(v) During SEP, whether or not the client has an eligible life event.
(vi) The type of HRA offered (ICHRA or QSEHRA).
(vii) Coverage start and end date
(viii) Whether the client is currently enrolled in an ICHRA
When can ACA agents enroll clients into ICHRA plans?
A Special Enrollment Period (SEP) is triggered when an employer offers an ICHRA. The employee will have 60 days to enroll in qualifying individual coverage. If the employee misses the SEP deadline, they will need to wait until the Open Enrollment Period (OEP) to get covered.
Conclusion
ICHRA plans are an opportunity for ACA agents to help eligible employees navigate the individual market. As we look towards the next year, this new HRA will only become more popular with large employers and small businesses as a way to control their costs.
As an ACA agent, look for employers who offer employees ICHRA plans or may be considering it. Similar to COBRA, you can offer to partner with an employer and help their employees through the enrollment process.
Get started with ICHRA enrollments on HealthSherpa today
HealthSherpa is ready to help you make the most of this moment. Our platform is ready to process ICHRA enrollments, and the only insurance policies you will find on our site are ones that meet the requirements of the Affordable Care Act.
If you already have a HealthSherpa account, you can still enroll clients who have a Special Enrollment Period (SEP) for their ICHRA. Log in here to get started.
New to HealthSherpa? Don’t worry — it’s easy to get started with a free HealthSherpa for Agents account. HealthSherpa is an approved alternative to healthcare.gov, and we are able to help you enroll your clients directly on our site with Enhanced Direct Enrollment (EDE). Through a HealthSherpa account, you can enroll, track, and service your ACA clients year-round. Visit our HealthSherpa for Agents page today to learn more and sign up for an account.