How the ICHRA special enrollment period works

At Thatch, we’re partial to Individual Coverage Health Reimbursement Arrangements, or ICHRAs. These enable firms to offer employees contributions to cover their health insurance premiums.

While we champion ICHRAs as a solution, we have to concede they’re not a perfect solution. Our healthcare system is antiquated and complex. And, as we’ve noted before, ICHRAs are not a panacea for all that ails it.

ICHRAs are predicated on the government-sponsored exchanges set up by the Affordable Care Act. It is on these exchanges that we find the plans that are suitable for ICHRA contributions.

Obamacare, as the functional parts of the ACA are colloquially known, is imperfect and — like group health plans — has some shortcomings. But let’s start with this: You can’t just decide one day, “I want to start Obamacare” and expect it to take effect immediately. By the same token, you can’t switch plans any time you want.

Here’s what you, as the person selecting benefits for your company, needs to know about the windows of opportunity that govern your ability to offer ICHRAs. As you read on, you’ll see that sponsoring an ICHRA could be of immense benefit to a new hire.

What is the Special Enrollment Period (SEP) and how does ICHRA trigger it

The SEP refers to the time outside the regular annual open enrollment period during which individuals and families can sign up for health insurance or make changes to their current plans in the ACA (Obamacare) marketplace. The standard open enrollment period is from November 1 through December 15. However, the SEP allows for changes outside of this window under certain circumstances.

This means if a business wants to change from a group plan or make significant modifications to its existing group health insurance, it typically has to wait until the group plan's renewal date. However, businesses can decide to terminate their group health insurance at any time of the year, which may generate a qualifying life event for their employees. This could allow employees to then enroll in individual health insurance through the ACA marketplace during a SEP. Ultimately, this means you can offer an ICHRA to your employees at any time of the year.

For instance, if an employer terminates its group plan, employees losing their coverage would have a qualifying life event, and they would typically have 60 days from the date of the coverage loss to enroll in a new plan through the ACA marketplace.

Why switching to ICHRA can benefit your employees year-round

Let’s be clear: When you onboard someone, your new hire will probably be eligible to jump right into an Obamacare plan and accept an ICHRA payback from you.

But let’s start with the case of someone – a U.S. citizen to keep it simple – who just appeared out of nowhere and wants healthcare coverage through an ACA exchange.

There is an open enrollment period that runs annually from November 1 through December 15. That’s when you get to choose your plan, renew your plan, or change over to a new plan. But coverage doesn’t start right away. It kicks in January 1 of the coming year.

But a lot of people aren’t good with dates, and Obamacare seems to attract these customers. So open enrollment technically doesn’t end until January 15. But if you didn’t get around to signing up until sometime between December 16 and January 15, your coverage doesn’t come into effect until February 1.

Understand? If not, maybe the U.S. Department of Health and Human Services can explain it better. We doubt it, but we want you to have all the tools.

So what happens if it’s January 16? Or Super Bowl Sunday? Or Memorial Day weekend? Do you have to wait until it’s almost Veterans Day again before you can buy health insurance? Not necessarily.

Life: What happens while you're making plans

There’s an out to missing Obamacare open enrollment season: qualifying life events. And this is where you can really come to a new employee’s rescue if they’re uninsured, underinsured or even over-insured.

Usually, a qualified life event in ACA parlance refers to a change in household. Examples are marriages or the birth or adoption of children. The opposites are also qualified life events. A divorce or legal separation qualifies, as does placing a child in foster care or in the heart-rendering case if either a spouse or child dies.

Another qualified life event is a change in residence. Most moves would be covered, as long as they involve moving to a new county or ZIP code. There are other exceptions related to students, migrant workers and those moving in or out of transitional housing.

Also, if for any reason, someone should lose medical coverage abruptly, that would likely constitute a qualified life event.

Depending on the circumstances, coverage could either start immediately or, at the latest, the first day of the subsequent month. We’ll let HHS get in the last word about which rule applies in which specific case.

While that’s good news, be forewarned: There is an extra hoop for the new hire to jump through. They would need to call HHS’s 24-hour hotline at (800) 318-2596 to make the arrangement for ICHRA coverage. It’s still a new program and the process hasn’t been routinized yet.

This all raises a question, though: How long is a special enrollment period? Typically, it’s 60 days. Depending on the event, it could be 60 days prior or 60 days post. Job-based plans – a term HHS doesn’t define – could be as short as 30 days. Still, the statute seems to suggest that your employee will have 60 days to select a plan, which would go into effect on the first day of the following month.

Here's where ICHRAs can help

ICHRAs allow firms of any size to offer employees tax-free contributions to cover up to 100% of their individual health insurance premiums as well as other eligible medical expenses.

Instead of offering insurance policies directly, companies advise their employees to shop on a government-sponsored exchange and select the plan which best suits their needs. Premiums are then reduced by employer reimbursement rather than an advance premium tax credit. And, because these plans are already ACA-compliant, there’s no risk to the employer that they won’t meet coverage or affordability standards.

As noted above, an ICHRA is not a perfect solution but, for many startup founders and their early-stage employees, it could be a good one. And we should never let the perfect be the enemy of the good.

Frequently asked questions about ICHRA special enrollment period

What life events trigger a Special Enrollment Period (SEP) for ICHRA

The SEP comes into play when you face a “qualifying life event” as defined by the ACA. Big life changes—such as losing your existing health coverage, having a baby, getting married, moving counties, or even certain changes in household size—can unlock a special window for enrollment. If you or your employees experience any of these events, you typically have 60 days to sign up for a new ACA-compliant plan (and take advantage of ICHRA contributions).

Can employees use SEP to switch to an ICHRA anytime during the year

Not exactly “anytime,” but if a qualifying life event occurs outside the annual enrollment window, then yes, employees can enroll in an individual plan and take advantage of an employer-sponsored ICHRA mid-year. Losing group coverage, for instance, would trigger an SEP. If there’s no qualifying life event, employees generally have to wait until the standard open enrollment period (November 1 through December 15, with slight variations from year to year).

What happens if I already have a group health plan

If your business currently offers a group plan and you decide to terminate it, that switch can trigger an SEP for your employees. Once the group plan is officially ended, employees usually have 60 days to pick a new ACA marketplace plan, funded by your ICHRA contributions if you choose to offer them. It’s worth noting you don’t have to wait for the group plan’s renewal date—ending group coverage at any time can open up that special enrollment window.

How can employees shop for health coverage after qualifying for SEP?

Employees who qualify for an SEP can head to the ACA marketplace (healthcare.gov or their state’s exchange) to compare and enroll in available plans. They’ll need to provide documentation of their qualifying life event (like proof of prior coverage ending or a marriage license). Once they’ve selected a plan, they contact the marketplace or call HHS’s 24-hour hotline at (800) 318-2596 to finalize the details. From there, your ICHRA contributions can help cover their monthly premiums or other eligible medical expenses—because while the healthcare system may be complex, at least there’s a path to coverage year-round if life takes you by surprise.