Low-income workers who buy health insurance through individual coverage health reimbursement arrangements could give up Affordable Care Act premium subsidies or lose eligibility for free or low-cost coverage, according to a report by the not-for-profit United Hospital Fund on Friday.
The report also found such arrangements could lead to higher individual market premiums, loss of employer-sponsored insurance and increased consumer burden. UHF recommended three changes that federal agencies or Congress could make to address the problems: allow low-income workers to opt-out of them without an affordability test; allow participating individuals to keep their ACA tax credits no matter their income; or discourage employers from ending their employer-sponsored plans through new restrictions.
"Federal agencies estimate that take-up of (HRAs) by employers will lead to a reduction in premium tax credits of $6.2 billion annually by 2029, and it's easy to see why: the reduction in tax credits is baked into the design of the … rule. It effectively overrides ACA statutory caps on premiums for enrollees eligible for (tax credits)," the report said.
Employers had been slow to offer individual coverage HRAs, perhaps because the new regulations came out too late in 2019 for brokers to educate many employers about the individual coverage HRA. Take Command Health—an HRA administrator that runs a private exchange—said in February it had helped 200 employers implement the new option.
But "HRA signups have more than doubled … and it's certainly trending upward now with benefits season here," the company said in an email last month.
An individual coverage health reimbursement arrangement is an employer-funded, account-based group health plan used to reimburse employees for healthcare expenses on a tax-free basis.
Employers choose how much to contribute to employees' individual market insurance premiums and medical expenses each year. They must offer the same terms to all participants within a class and cannot provide both a traditional group plan and an individual coverage HRA to the same class.
An employee covered by an individual coverage HRA must enroll in a qualified health plan. The employee is barred from receiving a federal premium tax credit to help pay for an ACA exchange plan, regardless of whether the employer's HRA contribution is affordable or not.
Employees can opt-out of the individual coverage HRA and claim the tax credit if they're eligible, and their employer's HRA contribution is unaffordable or doesn't provide minimum value, as defined by the regulation.
Affordability is based on the employee's income, the employee's required HRA contribution, and the lowest-cost silver ACA exchange plan available.
Shelby Livingston contributed to reporting this article.