Last week, the U.S. departments of Health and Human Services, Labor and the Treasury issued a final ruling allowing employers of all sizes that do not offer a group coverage plan to fund a new kind of health reimbursement arrangement, HRA, known as the individual coverage HRA (ICHRA).
Effective January 1, 2020, employees will be able to use their employer-funded ICHRA to buy individual-market insurance, including public exchanges formed under the Affordable Care Act (ACA). The ICHRA funds are eligible for premiums only.
This allows employers to have greater flexibility in how they offer health benefits. An important provision of the final regulation is the ability for an employer to offer the benefit it deems best fits its needs (either traditional group health or a premium HRA) to different classes of employees so long as all employees in a particular class are offered the same type of benefit.
Another important provision of the final regulation is clarification that HSA-qualified health insurance purchased with funds from an ICHRA is HSA-compatible. WEX was among the first to push for this important clarification and we appreciate that the agencies were responsive to industry comment.
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In one school of thought, the new regulation could lead to a shift away from group health to a defined contribution approach using the individual premium HRA. We will have to wait and see to what extent that happens. Two factors will weigh heavily on the outcome: how tight the labor markets are, and the cost and amount of product choice available in the individual market. For its part, the government has estimated that in nine years about 11 million individuals will be covered by individual insurance purchased in whole or in part with an ICHRA and that approximately 7 million of those will migrate from group health plans, which would represent a fairly modest migration.
Like regulations in the past that provide new plan opportunities for businesses offering and/or administering healthcare benefit accounts (like QSEHRA or defined contribution investments dating back to 2011), the WEX Health Cloud platform is supportive of this new ICHRA plan arrangement, so businesses can capture this new opportunity without missing a beat. Additionally, our investments in advanced premium billing capabilities position businesses who use WEX Health Cloud with the ability to support this type of arrangement in conjunction with individual exchanges or on a standalone basis.
WEX applauds the agencies for providing additional flexibility to employers and an avenue for the potential expansion of health insurance to working Americans. We will be working diligently to ensure our platform and our teams are prepared to help existing and new Partners take advantage of this opportunity.
For more information about WEX Health Cloud and partnering with WEX Health, visit https://www.wexinc.com/solutions/healthcare-benefits-management/.