ICHRA – Individual Coverage Health Reimbursement Arrangement

Can I reimburse my employee for health insurance costs?

It is rare something in the health insurance industry can be classified as “exciting”, but the Individual Coverage Health Reimbursement Arrangement (ICHRA) is EXCITING!  This type of health reimbursement account (HRA) gives employers a high amount of flexibility in offering benefits to employees.
 

Advantages of ICHRA

ICHRA does not have a set amount that you are needing to contribute. It does need to be the same amount for each employee within pre-defined class.

Gives employees freedom to choose any plan from any carrier on the individual marketplace

ICHRA is available to any size employer​. Because IRCHRA is a group based plan, new employees can gain coverage at employment and do not need a qualifying event to enroll.

The monies are not taxable to your employees and an FSA may also be offered since it is considered a group health plan.

Can be less expensive than group plans​

How it works:

Employers can set a flat amount they will reimburse employees who enroll in individual coverage, Medicare coverage, dental, and even vision coverage.  The employer can determine which types of coverages are eligible for reimbursement. When an employee pays their bill for their individual plan purchased directly with the carrier (or even through the state exchange), they can submit that bill for reimbursement to their ICHRA provider.  In addition to reimbursement for the bill, the employer can also elect to reimburse for certain out-of-pocket expenses defined by the IRS.  One of the many benefits of the ICHRA is that it is considered a group health plan.  This means that new employees can enroll in it without a qualifying life event; it is considered a qualified health plan for large companies looking to fulfill the employer mandate, and contributions are free from payroll and income taxes.  

Disadvantages of ICHRA

Employees enrolled in ICHRA are not eligible for tax credits through the exchange regardless of income level.

Individual plans generally have smaller provider networks, less prescription drug coverage, and higher out-of-pocket maximums than what can be found in the group marketplace.

Employers must offer coverage to a pre-defined class of employees. There are ten options, and there are minimum class size requirements.

Since ICHRA is considered a group health plan, employees must be offered COBRA and/or Continuation Coverage if they terminate employment.

If you are thinking that ICHRA is the answer to your health insurance needs, contact Schatz Benefit Group. Their team of experts will ensure you have the correct defined class for your employees and will even assist each individual in finding coverage that best fits their needs.