Here are a few frequently asked questions when it comes to ICHRA and COBRA
Question: Is the ICHRA subject to COBRA for employer groups?
Answer: ICHRAs are subject to COBRA for employers with 20 or more employees.
Question: Is the ICHRA subject to COBRA for medical and Medicare?
Answer: Yes. The ICHRA is subject to COBRA, but the individual major medical plans and Medicare coverage obtained by employees are not subject to COBRA. However, COBRA does not apply if an employee loses their individual major medical coverage or Medicare coverage during the year (for example, due to non-premium payment). Former employees who continue coverage under the ICHRA by virtue of COBRA must continue to be covered by an individual major medical plan or Medicare plan.
Question: What about HRA and COBRA
Answer: An individual coverage HRA cannot be integrated with other group health plan coverage, such as COBRA coverage. Generally, HRAs are group health plans subject to COBRA continuation coverage requirements. Under COBRA, certain individuals who lose employer-sponsored coverage may elect to continue the coverage by paying a premium when the loss of coverage is due to a “qualifying event.” Failure by an individual to satisfy the integration requirement of maintaining individual health insurance coverage is not a qualifying event for purposes of COBRA. Thus, the loss of eligibility to participate in an individual coverage HRA due to the failure of the individual to maintain individual health insurance coverage does not create a right to COBRA.
A loss of coverage due to a termination of employment or a reduction in the number of hours of employment generally is a loss of coverage due to a qualifying event. – For example, an employee covered by an individual coverage HRA (ICHRA) who, due to a reduction in hours, is moved to a class of employees who are not offered any group health coverage would have a right to COBRA in the HRA, as would an individual who loses coverage under the HRA due to termination of employment. – In this situation, the employee also qualifies for a special enrollment period to change individual health insurance coverage.
Question: Is COBRA required for an employer with 20 or more employees?
COBRA requires an employer with 20 or more employees to offer continuation coverage to employees and their dependents where they lose coverage as a result of a qualifying event, such as an employee’s death, divorce, or job loss. See State rules for exceptions.
Note: Individual health plans are not employer-sponsored, therefore, employees can continue to participate in them even if they are no longer employed by that employer.
Question: Can employees who lose their offer of an ICHRA due to termination or reduction in hours claim a subsidy?
Yes, employees who lose access to coverage funded by an ICHRA will get access to a Special Enrollment Period for loss of Minimum Essential Coverage.
What are the protocols when an employee terminates so that we can understand what the total rate is for COBRA notification purposes?
For employees with individual health coverage and a qualifying life event, Cobra is usually not selected because the employee would be required to pay an additional 2% administrative fee. Employers who use benefitbay pay the entire cost of the monthly premium and payroll deduct the amount more than the ICHRA contribution. Once the company stops paying the monthly premium, employees contact their carriers and change the method of payment to their personal account. This way, the employee keeps the same coverage, and they aren’t required to pay the additional 2% COBRA administrative fee.
Premiums for continuation of coverage through an HRA are handled the same way with ICHRA as with traditional HRAs. The employer’s COBRA rate is the employer maximum contribution for each class of employees. The COBRA premium amount can include a 2% administration fee.
When an employee is terminated what does the employee receive? Do they receive a letter from BenefitBay? Or do they receive a letter from their insurance carrier? What is the process?
- An employee receives an email from benefitbay (see below). We recommend that employees identify their personal email address in their benefitbay portal so that the email can be received by them after they leave the company. Employees who use their work email will likely not receive this message if their email has been shut off.
Hello,
We have noticed a change in your employment status. We understand at this time, you may have some uncertainty about whether you can keep your benefits.
Your medical coverage is fully transportable and you are welcome to keep your plan. If you would like to keep your coverage you will need to provide a new form of payment, please complete the steps outlined below:
Go directly to your insurance carrier account and change the banking information from the benefitbay® ARC account to a personal form of payment
Confirm with your carrier that your new payment method is set for autopay for future recurring payments
If you choose NOT to stay on your healthcare plan, you will need to notify your insurance carrier directly to terminate the individual policy. This would mean you would no longer have access to this individual medical plan. This would be the best step if you have enrolled in another medical plan such as a new employer policy, or will be covered as a dependent on someone else's plan.
NOTE: Declined medical premium payments may have a negative impact on your ability to gain coverage in the future.
During this time of transition if you have any questions or issues, please reach out to the benefitbay® Customer Support (support@benefitbay.com).
Best regards,
The employee has two options:-
- The employee can contact the carrier and change their method of payment to their personal account.
- The employee can cancel the policy.
Employers can use this link for instructions on how to terminate and employee.
https://knowledge.benefitbay.com/employers/terminating-employees
Since this is an individual policy, the employee is required to contact the carrier and make the changes. Unfortunately, neither benefitbay or the employer can make either of these changes on behalf of the employee.
Some employers meet with their employees prior to them leaving the company. During that meeting, they contact the carrier with the employee and complete one of the options noted in #2 above.
Frequently, employees will choose to do nothing. Benefitbay protects the employer by “disputing” (sending back) any payments that are presented to the ARC account for that employee after they have left. Employees should be told that if they do not change their method of payment or if they don’t cancel their coverage, the insurance company may attempt collection proceedings against them.
What information needs to be sent to the COBRA administrator?
Navigate to the Employee Management section of the benefitbay platform and click on the 3 dots in at the far right. Then, click on Terminated Employees.
You will find the Max ICHRA Contribution for the employee that was terminated and submit that to your COBRA administrator.
