Questions from ICHRA Webinar (10/05/2022)
Answers provided by Tom Crennen of ICHRA Systems
Q: How is ICHRA the same as small business group insurance and how is it different?
A: ICHRA’s are a true group health insurance plan from groups of one to any size. They are different in many ways as they allow employees to pick individual and family plans from their local area versus the limited choices normally associated with traditional group plans. They also have no minimum participation or contribution requirements.
Q: Is ICHRA a reimbursement? One of my clients has an offer but it seems it’s via reimbursement… it’s hard for an employee to front $400 and wait to get reimbursed.
A: They can be done either with reimbursement (where the employee pays and is then reimbursed) or the employer can pay the individual premium and the employee’s share is taken out of their payroll like in a traditional group plan.
Q: I am working with a prospective client – one owner and one employee – both of which are “employees” of a PEO so I can’t write a traditional group health plan… I am thinking this would be an option for them. Additionally, if this is an option, can the employer use this concept and the employee still qualify for APTC and/or CSR?
A: Maybe. Owners can usually just write off the health insurance expense and use an ICHRA for the W-2 employee. (You should see your accountant about this, though.) If they are a C Corp, then both can use the ICHRA. If the company contribution for the employee is determined to be unaffordable, an employee can waive the ICHRA and get a tax credit plan on the exchange.
Q: It’s also my understanding that if an employer offers an ICHRA that the employee cannot qualify for subsidies, is that accurate?
A: Again, maybe. If the employer’s contribution is determined to be low enough to make that option unaffordable for the employee, then they can go to the exchange and get a tax credit plan. It is anticipated that the “Family Glitch” be fixed in the near future so that if the ICHRA is affordable for the employee but unaffordable for the family, then the rest of the family will be able to get a tax credit plan on the exchange.
Q: To ensure I understand: Colorado has a reinsurance mechanism in the individual market that causes individual premiums for a given plan to be less than what the premium would be for the same plan in the group market?
A: Generally, that is true, with some varying areas being much lower than others. The reinsurance “help” can vary by rating area but has been shown to result in lower premiums than similar group plans.
Q: How would the ICHRAs work for sole proprietors? Could they set up an ICHRA to have the business fund the premium and then they purchase coverage on or off the exchange? And if so, can the sole proprietor obtain APTC and/or CSR if they would otherwise qualify?
A: It depends on the business structure of the sole proprietor. Many times, an individual owner can simply deduct the cost of (individual) healthcare as a business expense. They may qualify for a tax credit plan and CSR (again, see your accountant). ICHRAs are primarily used to help employees, and less for owners that may be able to simply deduct the whole medical insurance cost as a business expense. Generally speaking, the employee wants to purchase the individual policy directly and not through the exchange for the employee’s portion to be treated tax free. Tax credit exchange policies cannot be used in combination with an ICHRA.
Q: Can an employee purchase the individual plan through C4HC and receive an APTC and then still receive the employer contribution?
A: Not legally.
Q: How’s the billing? One on behalf of all EE’s, carrier bundles, each individually, or reimburse EEs?
A: Different ICHRA administrators do it differently. We prefer that the employer pays the individual plan directly to the carrier through EFT and the employee pays their share tax free through the payroll deduction and Section 125 plan.
Q: So, does the employer need a cafeteria plan to offer ICHRA?
A: ICHRAs are a specific type of HRA, other cafeteria plans can be added alongside.
Q: Who are the good TPAs to administer ICHRAs?
A: I’m partial tofor Colorado groups. There are lots of other ICHRA administrators, like NexBen, Take Command Health, Gravie, Tasc, Ameriflex, People Keep, Sterling Administrators, etc…
Q: What happens if an employer offering an ICHRA hires an employee mid-year that doesn’t currently have an individual plan and they are not eligible to apply for an individual plan until the next open enrollment, are there ramifications to the employer because of this?
A: The ICHRA establishes a “SEP” (Special Enrollment Period) so new employees can get new individual policies when they are hired if they don’t have one already.
Q: It feels like one pit fall would be network/access to providers. ACA feels like it has a much leaner network vs. group – which leads to access where you might have to wait weeks for an appointment.
A: This can be a problem as all of the Colorado individual plans (with a minor exception of a very limited Anthem PPO) have smaller doctor networks than the larger (and more expensive) group PPOs. This is somewhat offset in that employees in Colorado have many individual plan choices where they can probably find their doctor. Some may want Kaiser or Friday or Cigna individual plans which can usually offset the PPO issue. Employees in different areas pick from local plans in their area, helping to offset the multi-state issue. Right now, in Colorado, Friday Health is the only individual plan that allows for students in other states.
Q: Can ICHRA employees receive a subsidy on exchange? Are they eligible to go on exchange?
A: Please see answers four and seven. It’s all about affordability, but employees can choose either an ICHRA or a tax credit plan. The two can’t be used at the same time.
Q: I’ve heard about an annual ACA reconciliation, or something like that – and that this can be overwhelming administratively if there are many employees across many ZIP codes. How would that work?
A: Members who get tax credits to have to reconcile the tax credits when they file taxes. Employers who offer ICHRAs do have certain reporting requirements like PCORI fees and 1095-B or 1095-C forms.
Q: How are mid-year hires handled? Without a qualifying SEP, wouldn’t they have to wait until 1/1 to start?
A: No, they can be added mid-year. See answer to question 11.
Q: I’m not clear on the exchange rules. They can have an ICHRA as long as they are not receiving a tax credit on the exchange?
A: My understanding is that this is true, but plans purchased through the exchange require that the employee’s share of the plan be paid for with taxable money. Buying off the exchange can result in the employee’s cost for the plan being treated tax free when a Section 125 plan is used. If an employer pays 100% of the plan cost, and the member doesn’t get a tax credit, it would be OK to buy the plans on the exchange.
Q: How do you factor in the affordability aspects for groups 50+?
A: Affordability is different for ICHRAs than traditional small groups, but generally it is determined by finding the cost for the lowest priced Silver Plan on the local state exchange (for that employee) less the applicable employer only contribution and determining that if the cost is less than the employee’s (and family’s) annual gross income divided by 12 times 9.12% for 2023.
Q: What’s the status on fixing the “Family Glitch”?
A: Rumor has it that it should be “fixed” by the end of October.
Q: Who is the broker on the account? The TPA or the broker?
A: It depends on the ICHRA administrator. For ICHRASystems.com, the broker typically has AOR. For other ICHRA administrators, they may keep the AOR and share a percentage of revenue with the agent.