In September, PeopleKeep launched a new online tool to help employers easily compare the cost of an individual coverage HRA (ICHRA) to the cost of their current group health insurance plan (or quote). This decision support aid became so popular that we realized that employees would benefit greatly from a second tool that could help them understand if their ICHRA allowance met IRS requirements for affordability and then to determine if they should opt in to their employer’s plan. An affordable ICHRA allowance is one that, when combined with up to 9.83% of an employee’s adjusted gross income, gives them enough money to purchase the lowest cost silver plan on the Healthcare.gov site or their state exchange.
Accordingly, PeopleKeep launched the ICHRA employee affordability calculator on November 15, 2020. This article provides information about how this software helps employees as well as employers.
How the ICHRA employee affordability calculator helps employees
Employees who are eligible for premium tax credits (PTC) will no longer be eligible for them if their employer offers them an ICHRA that is considered affordable. The tool helps employees understand this element of the ICHRA benefit. If the allowance employees receive is unaffordable, they can use the tool to help them decide whether they want to opt in to the ICHRA anyway, or opt out and keep the premium tax credits.
How the ICHRA affordability calculator helps employers
While designed with individual employees in mind, employers can use this calculator to quickly determine if the allowance they are offering meets the minimum affordability criteria for employees. It’s a good snapshot tool but is not meant to help employers fully design their ICHRA benefit. For example, it will help an employer understand whether the allowance they offer will enable employees to purchase a qualified health plan (QHP), meaning one that provides minimum essential coverage (MEC).
How the ICHRA affordability calculator works
Employees or other users enter key census information, including:
- Zip code to identify the plans available at an employee’s location
- Household income before taxes (gross income)
- Birth date to select a plan for the employee’s age
- Self-only allowance is asked for since it is used in the affordability calculation. For PeopleKeep users, finding their self-only allowance amount (even if they aren’t single and have been offered an allowance amount for a family) is easy. For other users, this important distinction may take some research.
- Family status to determine if the employee is single, married and/or has dependents
Using this information, the calculator determines affordability by taking the lowest cost silver plan and subtracting the total of their monthly self-onlyICHRA allowance plus 9.83% of the employees’ monthly income. If the total is positive, the ICHRA allowance is affordable; otherwise, it is considered unaffordable.
Next, the calculator offers recommendations about whether the employee should opt in, based on whether the employee currently has health insurance and where that insurance comes from. For example, if the employee currently has individual health insurance and the allowance they are offered is affordable, they should definitely opt in because if they were eligible for the PTC they will lose it anyway and if they weren’t, they can now get reimbursed for the cost of insurance premiums up to the ICHRA allowance. Alternatively, if the employee already has group coverage (from a spouse’s or parent’s plan), it is generally advisable that they opt out of the ICHRA and remain covered under the group health insurance plan.
Importantly, as PeopleKeep is not a licensed agent or broker, we always recommend employees consult one if they have questions.
With the ICHRA affordability calculator, employees can quickly see if the allowance they are being offered makes individual insurance affordable and then get recommendations about whether they should opt in or opt out of their employer’s ICHRA. It’s important that employees understand their ICHRA allowance and then make informed decisions about participating in the ICHRA benefit offered to them by their employer. PeopleKeep is committed to helping employers design an ICHRA benefit that provides the appropriate allowance and features while keeping budgets defined and in check. We are also committed to helping employees understand, make decisions about, and, when appropriate, fully use their ICHRA benefit.