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Special Enrollment Periods for Health Reimbursement Arrangements (HRAs)

January 31, 2020
SEP, Open Enrollment, Marketplace

Previously, offering a health reimbursement arrangement (HRA) came with difficulty for businesses whose employees didn’t already have health coverage.

Things have changed with the final ruling effective this year regarding HRAs. Starting in 2020, not only is a new HRA available through the individual coverage HRA (ICHRA), a special enrollment period (SEP) is now available to individuals and their dependents who become newly eligible for HRA coverage.

Those who are newly offered access to either the ICHRA or the qualified small employer HRA (QSEHRA) with plan years beginning on or after January 1, 2020, will have access to the SEP.

What is Open Enrollment?

Open enrollment is the designated annual period during which individuals are able to enroll in individual marketplace coverage that meets the requirements for minimum essential coverage (MEC). This period generally begins November 1 and extends to December 15.

With current marketplace regulations, it isn’t possible to enroll in an individual policy (non-group insurance) that qualifies as MEC at any other time during the year, unless those enrolling qualify for a special enrollment period by experiencing a qualifying life event.

What is a Special Enrollment Period?

A special enrollment period (SEP) is an enrollment period for major medical insurance outside of the defined open enrollment dates.

An SEP gives individuals a 60-day window to purchase health coverage through the individual marketplace outside the regular open enrollment period. To qualify for an SEP, a qualifying life event must be experienced. There are four basic types of qualifying events: loss of health coverage, changes in household, changes in residence, and other.

Common qualifying life events are:

  • Loss of health insurance
  • Moving to a new home in a new zip code or county
  • Moving to the United States from a foreign country or U.S. territory
  • Moving to or from the place you attend school
  • A seasonal worker moving to or from the place they live and work
  • Moving to or from a shelter or other transitional housing
  • Losing COBRA coverage
  • Losing individual health coverage for a plan or policy
  • Losing access to Medicaid or Children’s Health Insurance Program (CHIP)
  • Losing access to Medicare
  • Losing coverage through a family member

With the ruling, a new qualifying life event is included for employees offered an ICHRA or QSEHRA for the first time.

How the new SEP rules work for HRAs

An employee newly offered an ICHRA or QSEHRA can use their SEP to sign up for new individual coverage through the marketplace. Let’s take a look at what this looks like in a real-life scenario.

Example 1

Big Bad Construction - Thomas K.

Thomas was hired to Big Bad Construction as a site foreman on January 15, 2020. His previous employer didn’t provide any health benefits and Thomas had no insurance coverage when hired. As part of his employment at Big Bad Construction, Thomas is offered an ICHRA. He’s eligible for enrollment in the ICHRA as of his first day of employment. Even though Thomas missed open enrollment, he has a 60 day special enrollment period to sign up for a policy starting on January 15.

Example 2

Texas Ceramics - Denise H.

Denise has worked for Texas Ceramics as an executive assistant for five years. Up until now, the company has not been able to provide a health benefit. The business owner recently heard about the QSEHRA and found that it was a good fit for the business. The start date of Texas Ceramics’ QSEHRA is February 1. Denise doesn’t currently have insurance coverage. Because she’s newly eligible for the QSEHRA she has 60 days from February 1 to sign up for a plan through the marketplace.

Conclusion

Before the new HRA ruling, employees that didn’t have previous coverage or were offered an HRA mid-year had to wait until the next open enrollment period to purchase an individual health insurance policy with MEC. Those who didn’t have an MEC policy could still participate in a QSEHRA, but their reimbursements were subject to income tax.

The new rules effective January 1st, 2020 make it easier for companies to transition to a QSEHRA. Their employees can now sign up for qualifying coverage immediately rather than having to wait months to enroll, and can choose a policy based on their HRA allowance and receive tax-free reimbursements for their premiums and other eligible expenses.

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