ICHRA to be codified? Ways & Means advances one of the few (mostly) good ideas Trump's HHS Dept came up with
Individual Coverage Health Reimbursement Arrangements, or the unfortunate-sounding ICHRA for short, are a type of health insurance arrangements which were created via Trump administration-era regulations back in 2019.
Louise Norris, as always, offers the best explanation of how ICHRA's work:
An individual coverage health reimbursement arrangement (ICHRA) is a new type of health reimbursement arrangement in which employers of any size can reimburse employees for some or all of the premiums that the employees pay for health insurance that they purchase on their own...ICHRAs represent a departure from previous ACA implementation rules that forbid employers from reimbursing employees for individual market premiums....
- Large employers can use an ICHRA to satisfy the employer mandate as long as the ICHRA benefit is substantial enough to make an individual health insurance plan affordable.
- ...There are no limits on how much an employer can reimburse under an ICHRA (unlike a QSEHRA, which does have limits).
- An employer cannot offer an employee a choice between a group health plan and an ICHRA; it has to be one or the other. An employer can offer both a group health plan and an ICHRA, but they have to be offered to different classes of employees so that no employee has an option to choose between the group plan and the ICHRA.
Note: This is the source of one of the concerns some have expressed about ICHRAs re. potential discrimination; see below.
- Employees who become eligible for reimbursement of premiums under an ICHRA (or QSEHRA) are eligible for a special enrollment period during which they can enroll in an individual market health plan.
- Employees must be enrolled in an individual market health plan (or Medicare) in order to receive the ICHRA benefit. In most cases, this will mean fully ACA-compliant coverage, but the rules do allow people with grandmothered and grandfathered plans to utilize an ICHRA benefit if it’s available to them.
This would have been concerning had ICHRAs been around 4-5 years ago, but the grandfathered/ grandmothered (aka "transitional") plan market has shrunk to perhaps half a million people or so anyway, so it's pretty much a moot point today.
- If the ICHRA benefit covers some, but not all, of the employee’s premium in the individual market, the employer can allow the employee to use a pre-tax salary reduction (via a cafeteria plan) to pay the employee’s share of the premium, but only if the plan is purchased outside the exchange. If the employee purchases on-exchange coverage with the ICHRA funds, the employee cannot use a pre-tax salary reduction to fund the remainder of the premium (assuming the ICHRA benefit doesn’t cover the full premium).
I've always assumed that the virtually all ICHRA enrollment is done off-exchange due to this wrinkle, but HealthSherpa's CEO (disclaimer: they're a sponsor of this website) figures it's not that dramatic--he thinks it's more like a 70/30 split. If so, this would mean perhaps ~160K off-exchange ICHRA enrollees & ~40K on-exchange last year, or perhaps 200K total in 2022. Apparently the paperwork involved in off-exchange ICHRAs is more involved, which helps explain why a decent portion is on-exchange despite losing the pre-tax salary reduction benefit.
Sherpa's estimate of 100K - 200K ICHRA enrollees is a pretty tiny market for now, but they also estimate this number is up 5x from 2020 (the first year ICHRAs were available), so it could become a significant chunk of individual market enrollment going forward.
I only really wrote about ICHRAs in depth one time before today...exactly 4 years ago, on June 14, 2019, when the official ICHRA proposed rule was first formally introduced. At the time, without knowing some of the details involved, I was pessimistic about the plan--there seemed to be too many loopholes and poison pills included, two of which I found especially concerning based on Rachel Schwab of the Center on Health Insurance Reforms' (CHIR) analysis:
Employers can either offer “integrated HRAs” that provide funding for employees to purchase ACA-compliant plans on the individual market, or “excepted benefit HRAs,” which provide a maximum of $1800 per year to purchase a short-term plan, which is not subject to the ACA’s rules...The proposal would also permit employers to differentiate between different classes of employees, allowing them to offer certain classes an HRA instead of a group health plan while continuing to provide traditional group coverage for other classes.
You can already see both problems here: First, the "excepted benefit HRA" option, which gives employers a tax break on putting employees into non-ACA compliant #ShortAssPlans; second, the potential for deliberate adverse selection--potentially offloading employees more likely to be sick/high risk into an ACA plan while keeping healthier/lower-risk employees enrolled in the group plan:
...employers could easily discriminate against sicker, older workers by offering them HRAs instead of traditional group health insurance as a way to ease the employer’s financial burden. The California DOI argued that employers may treat the individual market as their “very own high-risk pool,” leading to adverse selection and market instability, including higher premiums. The D.C. marketplace echoed these concerns, further advising that the excepted benefit HRAs will increase the prevalence of “junk plans,” particularly among young and healthy workers; this could result in higher premiums for the workers who are too sick to opt for the excepted benefit HRA. The Minnesota DOI advised the excepted benefit HRA could siphon healthy risk out of the small group market...
The proposed rule contains provisions meant to prevent this sort of risk segmentation, but the states in our sample were skeptical of the current proposal’s effectiveness.
Since June 2019, however, I admit I haven't really kept up with any tweaks/changes to the ICHRA rules/regulations, and in practice, at least according to several trusted sources of mine, neither of these concerns has really amounted to much as of yet. Regarding the potential for discrimination:
...Can’t speak to the rest of the bill, but you know my perspective that ICHRA implemented well would be a great thing for the Indy market (and continuity of coverage for workers in high-churn industries.) I’d be happier if they’d fixed the stupid cafeteria plan thing though…
IIRC a lot of the fear around ICHRA in the beginning was that employers were going to combine classes in nefarious ways to discriminate - at least in my experience I haven't seen anybody really use the classes much at all...let alone do complex combinations of them. Most of the employers are probably too small for that tbh given there are minimum class sizes.
Regarding the short-term plan concern:
the excepted benefit hra thing: yeah I have literally never heard anybody ask for one of those...doesn't mean it's not happening...
IIRC it was basically an extra account (NOT tied to the ICHRA) that you could offer alongside your group coverage to pay for other benefits e.g. dental/vision, would include STLDI. But I don't think it got you out of your ACA obligation to provide group in any case
In other words, apparently this would be in addition to whatever ACA-compliant minimum essential coverage requirement the employer would be obligated to provide, assuming they're a medium or large employer.
There are still some other concerns noted 4 years ago by CHIR, but the general sense I've gotten from multiple insurance brokers and other experts is that on the whole, ICHRAs have been a net positive so far.
With all that as prologue, the GOP-controlled House of Representatives is looking to codify the ICHRA program, which is currently still in place via regulatory authority. via Amy Lotven of Inside Health Policy:
Ways & Means lawmakers approved along partisan lines the CHOICE Arrangement Act, sponsored by Kevin Hern (R-OK), that codifies -- and renames -- provisions in a Trump rule that let employers reimburse workers for coverage purchased in the individual market.
...Republicans argued the arrangements provide consumers the protections in the ACA, including the law’s ban on insurers denying coverage due to preexisting conditions, and do not allow employers to discriminate, but Democrats said the bill is yet another effort to undermine the ACA and could result in some employees getting fewer benefits than others. Democrats were also upset that the legislation had not been part of the committee’s discussion until about 36 hours before the mark-up.
To ease concerns about potential discrimination -- and to ensure a future administration does not offer a different interpretation of the bill -- Rep. Lloyd Doggett (TX), ranking Democrat on the W&M health subcommittee, offered an amendment that adds a reference to the public health law.
I've also gotten some additional details and clarification from another insurance broker who specializes in ICHRA solutions:
- The ICHRA bill is scheduled for a full House vote next week.
- Many small businesses are still better off just sending employees directly to the ACA exchange and bypassing the ICHRA process entirely. Both employers and employees would lose out on the tax deductions but it's much simpler and the employees would likely qualify for more savings via traditional ACA tax credits anyway (especially low-income employees), as well as being eligible for cost sharing reductions (CSR).
- Re. concerns about the short term/junk plan issue: They say they've only encountered this one time so far, for a single employee who unintentionally selected a short term plan as part of their ICHRA; they ended up switching the employee over to an actual ACA exchange plan anyway.
Honestly, I'm a bit ambivalent about ICHRAs. I've long been an advocate for breaking the locked-at-the-hip "employer/group coverage" system in the U.S. which ties healthcare coverage to your employer...which, ironically, the ACA itself underscores via its employer mandate penalty. Frankly, I'd be fine with the small group market, at least, being phased out in favor of the ACA-compliant individual market. There are strong arguments to be made in favor of the ICHRA system as long as its properly regulated...which, of course, is the critical key.
One element I do find irritating is the provision which pushes people to enroll in off-exchange ACA plans; I'd much rather move all individual market coverage onto the exchanges. Overall, however, I don't really have any strong feelings for or against codifying it (depending on the details).
In any event, this is a true rarity: Healthcare-related legislation with Republican support which, depending on your POV, actually strengthens the Affordable Care Act and increases healthcare coverage...while being opposed by Democrats.
It will likely pass the GOP-controlled House, but it will be interesting to see whether it makes it past the Dem-controlled Senate. If it does, it will also be interesting to see whether President Biden vetoes the bill, especially given that he's allowed the existing ICHRA rules to remain in place so far.
UPDATE: After taking a look at the actual language of the CHOICE Arrangement Act, it's worth noting that it doesn't appear to include any language whatsoever regarding the "excepted benefits" option (EBHRA)...that is, the Short Term/junk plan option. This is noteworthy for a couple of reasons: First, it scratches that concern off my list. Second, it suggests that the anecdotal comments above are pretty representative: Almost no one has expressed any interest in the EBHRA option in the first 3 years of ICHRA being in operation anyway. And third, it suggests that some attempt really is being made to gain bipartisan support on this bill, which is stunning in and of itself these days.
As for the potential for employee cherry-picking, the bill specifies 9 different classes of employees: Full time, part time, salaried, non-salaried, employees within the same geographic rating area, unionized employees, new hires (haven't been around long enough for the group plan), seasonal employees, and migrant workers.
Finally, it's worth noting that neither HHS Sec. Becerra nor CMS Admin. Brooks-LaSure have seen fit to strike down either ICHRAs in general or the EBHRA portion specifically so far, so I assume either they're OK with it or they don't see it as being a high priority issue.