11 Dec New Federal Rule Could Open Door For Employer-Paid Individual Plans
Federal regulators have taken a beginning and extremely tentative step which could alter the landscape of employee group health benefits and how their premiums are paid.
In what the IRS said was to “initiate and inform the process,” it issued Notice 2018-88 to suggest ideas about how employers could utilize newly-envisioned Individual Coverage Health Reimbursement Arrangements (ICHRAs) as an option for Applicable Large Employers (ALEs) who are struggling with the cost of providing Minimum Value coverage plans as required by the Affordable Care Act. The IRS, in conjunction with the U.S. Depts. of Labor and HHS, requested comments and suggestions by Dec. 28, 2018.
If adopted, the new regulation theoretically would permit employees to use pre-tax funds from an HRA to pay for their individual health benefit plans. That appears to be the grand design by regulators. There are understandably many more questions than answers at this time which will take a lot of time to get fully vetted and answered.
Your takeaway for now: There has been no change in employers’ and ALE’s filing requirements. (See ETC Employer Alert — IRS Extends Form 1095-B and 1095-C Deadlines)
In the meantime, the federal agencies are trying to weave the new rule on ICHRAs into satisfying ACA’s Employer Shared Responsibility and the penalties that can be levied, including these areas:
- ICHRAs would be considered eligible employer-sponsored plans. This would mean an ALE could count ICHRA offers as satisfying the 95% threshold for avoiding penalties.
- Affordability of an HRA offering is considerably trickier than an ACA-compliant health benefit plan. Still the cost of the lowest price Silver plan in an area will be the starting point for determining affordability. There may be additional safe harbors permitted on this.
- Minimum Value. In a nutshell, it appears the new proposal says that if an ICHRA is affordable, it satisfies the MV requirements.
- Nondiscrimination. ICHRAs may be offered to different classes of employees and there can be no discrimination between employees within the same class. The unstated extension of that, of course, is that apparently an employer will be able to discriminate between different classes of workers.