There’s two new things that are helping Californians afford health insurance this year. The new subsidy assistance program through Covered California extends assistance to more individuals and families, and the new Individual Coverage HRA (ICHRA) allows for more businesses to reimburse tax-free for premiums. But can you use them together?
The new premium assistance program increases subsidies to 600% of the federal poverty line, meaning that individuals earning up to almost $75,000 a year and families of four earning as much as $154,500 will now benefit.
The individual coverage HRA, which became effective January 1st, will help business afford benefits for their staff—a benefits solution that’s timely given the introduction of the new California individual mandate which requires individuals in the state to purchase health insurance or face a penalty.
Some markets in California are prime real estate for the ICHRA to succeed—meaning individual premiums are low and stabilized, there are multiple carriers to choose from, and the group plans are similar to the individual plan prices. That’s why this trend continues to take hold in the state, and why more and more individuals will be wondering about whether or not they qualify for ICHRA reimbursements along with their premium assistance. California QSEHRAs are also positioned to take off for the same reasons of strong individual health insurance markets.
The new California subsidies were announced around the same time as ICHRA, so they weren’t set up to specifically address the details of their integration. We’ve done the digging for you here, so you can play your cards right when it comes to getting help paying for health insurance.
Here’s what you need to remember: Similar to other government subsidies, if you qualify for an HRA (whether it’s a QSEHRA or an ICHRA), go that route. If your ICHRA is considered affordable, employees should opt for the ICHRA reimbursements and not use the subsidy at all.
Federal subsidies and the Covered California premium assistance program are considered one in the same when it comes to HRAs. You can't have both.
If any household member has access to job-based insurance and that coverage is also offered to their dependents then whether you or your household are eligible for premium assistance depends on if it is affordable and if it meets the standard for minimum coverage. The affordability of employer-provided coverage is evaluated on these two criteria: The total annual premium you pay for self-only coverage is 9.86 percent or less of your annual household income. Your employer-provided plan covers at least 60 percent of health care costs for an average population. Your employer or your health insurance plan should notify you as to how much the plan covers. If those two criteria are met then your employer's plan is considered "affordable" under the law, and your household members would not qualify for premium assistance through Covered California.
If that math sounds confusing, we built an ICHRA affordability calculator to help you out.
Since this is the first time both of these benefits have been available, we advise our clients to consult with their CPA or accountant before making a decision. In the meantime, check out our ICHRA FAQ guide or chat with us online. We are around and ready to help answer your questions.
→ Read our California small business health insurance guide!