Some employers can vary their reimbursement rates by age. Most marketplace plans offer premiums in a 1:3 ratio for individuals ages 26-64.
For example, you could set reimbursement rates for a 26-year-old $100/mo and a 64-year-old $300/mo using the 1:3 ratio. A 37-year-old employee gets whatever amount on the linear line in between the 26 and 64-year-old—Get ready to dust off your old algebra skills! The answer for the 37-year-old in this example is $158/mo.
Federal guidelines establish age 21 as the baseline for these contributions, which ensures consistency and compliance with regulatory standards. This typical framework scales the reimbursement amounts upward from age 21 using federally defined curves.
Age-Based vs Coverage Category-Based Contributions
So what happens if you have a birthday during the year and are now eligible for a higher reimbursement?
Compliance with federal guidelines is mandatory for age-curved HRA systems. These require using the age 21 baseline to determine contributions, ensuring fairness and standardization.
The change in allowance does not go into effect until the following year. So if your birthday is in August, you will receive a higher monthly allowance in January of the following year.
For instance, using Method A, the reimbursement for a 32-year-old if the 26-year-old base is $275 can be calculated as: $275 + 6 × ($275 ÷ 19) = $361.82.
Once your insurance ends in December and you sign up for a new plan for the year, you will have a higher reimbursement amount to go towards that premium.