Does COBRA apply to my ICHRA benefits?

Short answer: In certain cases (namely if you have more than 20 employees or the state you’re located in), Cobra could apply. But due to how it works with an employee on ICHRA, we’ve never had an employee opt into it.

The reason is simple: if a former employee elects COBRA for the ICHRA, they may be responsible for paying both the cost of the individual health insurance premium and the cost of maintaining the HRA (such as the platform fee or PEPM). Since they're already paying the full premium themselves, it’s not practical. COBRA was designed to ensure that people still had access to the plan offered by a previous employer, which comes as a default with ICHRA.

Two things to keep separate

The individual health insurance policy

The employee shops for, selects, and owns their individual health insurance plan. When employment ends, the policy does not automatically terminate. The employee can:

• Continue the policy by paying the insurance carrier directly.
• Cancel the policy if they no longer want coverage.

Once employment ends, they simply stop receiving the employer's ICHRA allowance.

Note: StretchDollar contacts every terminated employee to explain their options with their current coverage — how to keep their coverage active (if they want to) and whether a change in income may make them eligible for premium tax credits. 

The ICHRA (the reimbursement benefit)

The ICHRA is the employer-funded reimbursement arrangement. While COBRA rules can apply to an ICHRA in certain situations, electing COBRA is typically impractical because the former employee may have to pay the full cost of the individual health insurance premium plus the cost of continuing the HRA benefit.

What typically happens

When an employee is terminated in the StretchDollar platform:

• The employer deactivates the employee, and ICHRA allowances stop as of the employee's termination date. (See this article for more details.)
• StretchDollar contacts the former employee to explain their coverage options.
• The individual health insurance policy remains active unless the employee chooses to cancel it directly with their insurance carrier. StretchDollar doesn’t cancel the policy on the employee's behalf.

Questions about your specific situation? Reach out to StretchDollar Broker support.