The final ruling made this year regarding health reimbursement arrangements (HRAs) in 2020 has made a special enrollment period (SEP) available to individuals and their dependents who become newly eligible for HRA coverage. Individuals who are newly offered access to either the individual coverage HRA (ICHRA) or the qualified small employer HRA (QSEHRA) with plan years beginning on or after January 1, 2020, will have access to the SEP.
An SEP gives individuals a 60-day opportunity to obtain quality, affordable health care through the individual marketplace outside the regular open enrollment period.
Previously, offering or gaining access to a QSEHRA wasn’t considered a qualifying life event for a SEP in the individual market. Employees who already had coverage could take advantage of their new QSEHRA benefit immediately, but those without coverage were forced to wait until the next open enrollment period or for another qualifying life event to obtain an individual policy.
This final ruling has been a huge step in the right direction to make small business HRAs more flexible and useful to individuals that don’t already have individual coverage.
In this post, we’ll go over six of the most common questions asked about SEPs for ICHRA and QSEHRA. We’ll also discuss how you can provide assistance to your employees once the SEP starts.
1. Why is the SEP necessary?
The QSEHRA and individual coverage HRA SEP is necessary because it gives individuals the opportunity to obtain qualifying health insurance coverage if needed. During this 60-day time period, individuals will also have the option to opt-out of the ICHRA offering.
2. Is there a notice requirement for offering an ICHRA?
Businesses offering the ICHRA must send a formal notice of the benefit to their employees once a year. The federal regulations include a sample notice you can adopt to serve as your employee notice.
This is required because an offer of an ICHRA may affect an individual’s eligibility for a premium tax credit (PTC).
Usually, employers are required to send employees this notice at least 90 days before the start of the plan year. However, there are some exceptions to this rule.
This timing of employees’ SEPs depends on the notice timing requirements your business is subject to (see question 3).
3. What is the triggering event for the SEP and how would that work for my business?
The triggering event for ICHRA SEPs is the first day employees are eligible for coverage. Whether the SEP will take place 60 days before the triggering event or 60 days after depends on whether your business is subject to the 90-day notice requirement.
For new and existing ICHRAs, businesses must send employees the required notice at least 90 days before the start of the new plan year. If your company is subject to this 90-day notice requirement, the 60-day SEP will be BEFORE the triggering event.
For employees who become newly eligible for the ICHRA mid-year, the notice must be sent by the day plan eligibility begins, at the latest. If your company is NOT subject to the 90-day notice requirement, the 60-day SEP is either before OR AFTER the triggering event.
For employees newly hired by employers established less than 120 days prior to the beginning of the first plan year of the HRA, the notice may be provided no later than the date on which the HRA may first take effect for the individual, for that first plan year of the HRA.
4. How does the SEP work if my plan renews mid-year?
If your company provides a non-calendar year ICHRA (e.g., the benefit starts and renews on June 1 each year), individuals will have access to a SEP to get coverage with no restrictions on which individual market plans they can select. The triggering event is the last day of insurance coverage under the current plan year.
5. How does the SEP work if an employee is hired mid-year?
Employees that are hired after January 1, 2020, and have enrolled in individual health insurance coverage effective on or before that date are eligible to enroll in the ICHRA with an effective date of the first day of the month following their date of hire.
The amount offered to these employees would also be prorated based on the number of months remaining in the plan year, including the month which includes their coverage effective date.
Employees hired mid-year will have access to a 60-day SEP after their triggering event.
6. What can I do to help my employees who are shopping for coverage?
As a business offering an ICHRA, you may provide assistance by referring your employees to a broker or online service to help them shop for coverage. However, you cannot advise on different plan options. Your references should be unbiased and shouldn’t steer individuals toward a particular health insurance provider or coverage.
The ICHRA SEP is a new opportunity for employees to obtain individual healthcare and have their premiums reimbursed by their company.
It paves the way for businesses to begin offering a valuable, tax-free benefit at any point in the calendar year.
Questions? Let us know in the comment section below!