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Topics of interest to both consumers and agents related to Covered California and the ACA biased in favor of the successful implementation of the Exchange and deliberately apolitical.

No Standalone HRAs Allowed in 2014

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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,

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