An Affordable Care Act mechanism intended to help small companies support ACA health insurance for workers is now being used by large companies to satisfy their ACA obligation to provide insurance to employees, under a Trump-induced loophole. They’re saving money, and selling it as enhancing choice.
Larger Employers Fund Worker Obamacare Option as Costs Spike, Bloomberg Law, Nov. 15, 2023, by Sara Hansard
Larger employers … are increasingly funding their workers’ purchases of Obamacare plans during open enrollment instead of providing pricier group health plans, taking a cue from small companies that have used this option.
The number of workers offered individual coverage health reimbursement arrangements grew 171% from 2022 to 2023, and the number of employers with at least 50 full-time employees offering the plans increased 144%, according to the HRA Council, a nonprofit advocacy group.
ICHRAs are tax-free accounts employers use to reimburse employees for health plans that comply with the Affordable Care Act. Employees can use the funds provided by their employers to choose individual plans in the ACA exchanges, rather than having to enroll in the more limited number of group health plans that employers typically offer. With fully-insured group plans, employers pay a health insurer for plans that cover the entire company.
The arrangements started in 2020 under a Trump administration regulation and have primarily been used by companies with fewer than 50 employees that opt to provide workers with health insurance options although the ACA doesn’t mandate it for companies that small.
(See CMS Publishes ICHRA Premium Look-up Table here)
But with inflation-driven health care costs rising quickly for both workers and employers, some larger companies that are required to comply with the ACA are using the reimbursement plans. …
“We were offering less and less benefit and it was costing more,” McKamey said. “We had to keep pulling out benefits and paring down the plan design in order to keep costs somewhat reasonable for the employees and the employer.”
ICHRAs allow employees to fit plans that meet the needs of young and healthy employees, as well people over age 65, who can receive employer payments that can be used towards Medicare supplemental plans, McKamey said.
SOURCE: Erosion of Job-Based Insurance to Defined Contribution – PNHP
