September 2021 Update from HRA Advisor Brian Blase

As part of our mission to promote education and awareness for health reimbursement arrangements and build upon HRAs to improve the stability and affordability of individual health coverage, industry and policy experts at the HRA Council publish regular commentary on the state of HRA legislation, adoption, and regulatory changes.

Our first September update is from HRA Advisor Brian Blase. In it, Brian provides highlights from a report shared by HRA Council Member People Keep, plus a regulatory update and a study on The Impact of the COVID-19 Pandemic and Recent Federal Policies on Small Business Health Insurance.

We provide this information for the benefit of our members in promoting and advocating for HRAs and to the general public for a better overall understanding of this health coverage innovation.

2021 ICHRA Report

HRA Council Member PeopleKeep has just published its 2021 ICHRA Report. In its report announcement, PeopleKeep writes that its goal with the report is to, “share unique customer data with year-over-year comparisons in allowance amounts, class sizes, expenses submitted and more, giving an inside perspective on how employers are using their ICHRA in 2021.”

The blog post and accompanying visual report touch on these highlights:

How much of a monthly allowance employers already using ICHRAs are offering their employees

How those employers with a premium-only account use their benefit compared to employers with a premium-plus account

How many employers are offering each type of account (premium-only vs. premium plus), and if applicable large employers (ALEs), who are eligible to offer an ICHRA under the Affordable Care Act, are more likely to offer a premium-only account than small and medium size businesses (SMBs)

How many classes employers choose to divide their employees into

Read the Full Report Here

The Impact of the COVID-19 Pandemic and Recent Federal Policies on Small Business Health Insurance

By Sabrina Corlette, Erik Wengle, Megan Houston, Tyler Thomas, August 3, 2021

This study—funded by Robert Wood Johnson Foundation and published by the Urban Institute—was based on interviews with 19 stakeholders in six states (Arkansas, Minnesota, Montana, New Mexico, Pennsylvania, and Vermont), consisting of insurance company representatives, brokers serving small business clients, and small employers and their trade associations as well as two benefit advisory firms. The interviews were conducted in March and April of 2021. Here are some key takeaways:

On the Individual Market and ICHRAs
Brokers report that individual market plans are less appealing to their employers for three reasons: 1) small provider networks with limited out-of-network coverage, 2) age-rated premiums expose older workers to higher premiums, and 3) high deductibles and cost-sharing.

Some brokers think that the enhanced premium tax credits under the American Rescue Plan will lead more small employers to not offer coverage, including ICHRAs.
Most respondents said ICHRAs are too complicated—raising concerns about the difficulty of explaining ICHRAs as well as complications with establishing ICHRAs.
Some respondents mentioned that ICHRAs suffer from poor broker incentives, both lower commissions associated with individual market coverage and that it is more work selling ICHRAs than a single group plan.
The authors do note that the use of ICHRAs appears to be growing in some states, especially states that developed reinsurance programs. Stakeholders in Minnesota reported rising interest in ICHRAs in part because small-group market premiums have been increasing relative to individual market premiums.

On Other Areas

In 2019, 31% of small firms (firms with less than 50 employees) offered health insurance and 54% of employees enrolled in their firm’s health insurance plan. In 2019, premiums for these firms averaged $6,920 for single coverage and $19,417 for family coverage. Source: Medical Expenditure Panel Survey
The COVID-19 pandemic did not have much of any effect on small employers’ offering of health insurance.
Self-funded plans are gaining popularity among small employers. “The growth is driven by level-funded plans that combine a self-funded employer plan, which is exempt from most ACA market rules, with a stop-loss insurance policy and administrative services.”
Firms that have younger and healthier workers have economic incentives to leave the ACA small group market—a fact that raises some concerns with both individuals interviewed by the authors as well as authors about the small group market risk pool for the authors of the study. If firms have a worker who experiences a significant adverse health event with their workers, they may then have incentives to move to the ACA small group market.
• Multiple Employer Welfare Arrangements or Association Health Plans are reported to be more robust in some states (Montana) than in other states (Pennsylvania)

The New HRA Regulations Explained

By Joanna Kim-Brunetti, ACA Times, July 28, 2021

Earlier this year the IRS released final regulations regarding the relationship between Employer Shared Responsibility Provisions (ESRP) and individual coverage Health Reimbursement Arrangements (HRAs). And then they were withdrawn by the Biden administration for review.

The regulations provide two safe harbors that employers can use for proving HRA affordability, the Look-Back Month Safe Harbor and the Location Safe Harbor.

The Look-Back Month HRA Safe Harbor allows an employer to leverage the monthly premium for the lowest-cost silver plan from a month during the previous calendar year for determining the cost of the current individual coverage reimbursement. For example, if your organization is looking to reimburse an employee’s HRA costs for January 2021, the lower-cost silver plan from January 2020 could be used.

The Location HRA Safe Harbor allows employers to use an employee’s primary site of employment as the location for determining HRA premium reimbursement. The employee’s primary site of employment location acts as a proxy for determining what is affordable for an employee to satisfy establishing ACA affordability. For example, if an employee reports to the business location in San Diego, despite the headquarters location being in Los Angeles, the employment site in San Diego should be used for determining the employee’s HRA cost.