If you’ve been wondering if an employer could drop group coverage and use an HRA to help individuals purchase coverage through the Covered California individual marketplace instead, the answer to that question is NO.

The Department of Labor issued a new FAQ document about the Affordable Care Act (ACA) implementation last week that clarifies that an employer-sponsored HRA may not be integrated with individual market coverage or with an employer plan that provides coverage through individual policies.

One of the big questions raised by the implementation of the ACA is just how much the small-group insurance market will be affected by the availability of premium-subsidies in the Covered California individual marketplace. Specifically, how many small-business employers will forgo group coverage in favor of releasing their employees to purchase subsidized coverage in the Exchange. Employers with mostly low to moderate income workers will most certainly be tempted to do so. It appears to be a win-win for employers as well as employees.

Current tax breaks available to employer-sponsored plans for both employers and employees should act as a restraint on wholesale defection from employer-sponsored coverage in the small group market. Employers who want to provide a contribution to employees for coverage in the individual exchange will do so with after-tax dollars and the employees will be taxed on the contribution as income. The stand-alone HRA had been seen as a loophole that would allow reimbursement of subsidized employees with after-tax dollars. That loophole has apparently been closed,

Enrollment in Covered California will not begin until October 1, 2013, but here are some things you can do to get ready.

1. Find out if your employer will offer health insurance in 2014? This is especially important if you work for a company with fewer than 50 employees.
2. Use this time to understand how health insurance works, including copays, deductibles, out-of-pocket maximums. You’ll need to understand these details to be an informed shopper.
3. Make a list of questions to have ready when it’s time to choose your health plan. For example,”Will this plan cover my prescription drugs? or “Can I stay with my current doctor?”.
4. Know your household income. (You’ll find it on your form 1040 listed as “Adjusted Gross Income”). Most people will qualify for a premium subsidy that will provide a substantial discount on health insurance costs. You’ll need your income information to find out for how much you’re eligible.
5. Set your budget. You’ll have to make some trade-offs between what you’d like and what you can spend. Breaking down the choices by cost will help narrow your choices.
6. Explore what’s available now. Perhaps you can get help with insurance now. Some changes are already in effect from the new health care law, for example dependent coverage to age 26, guaranteed issue for children, or the Preexisting Conditions Insurance Plan.

Covered California is in the process of developing agent contract terms that will govern agent duties and obligations. The Exchange hopes to release a rough draft of the contract in late January or early February 2013, with public comments to follow.

Heads Up Agents

This is a BIG deal for agents. The specific contract terms to be offered to agents will provide a true test of the Exchange board’s commitment to agent participation. Covered California did not have to include agents in the individual Exchange. It’s decision to do so surprised many and, it is fair to assume, disappointed some among the very vocal special interest groups who see agents as unnecessary middlemen at best. They can be expected to lobby for heavy-handed anti-agent rules.

We will publish the rough draft of the agent contract terms as soon as it is available.