ICHRA Basics: What You Need To Know

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The ever-changing landscape of healthcare benefits has left the U.S. healthcare system with more fault lines than the state of California.  Many people are looking for ways to save money on necessary coverage, and many employers are  struggling to provide sufficient, affordable options.  From presidential debates to the line in the grocery store, it seems everyone has new ideas for solving the “healthcare crisis” facing our nation.  With money savings and flexibility at the top of the priority list, ICHRA is likely to be the new healthcare buzzword of the hour.  It may sound like just another acronym for the financially savvy, but an ICHRA could be the healthcare solution many have been looking for.

 

What is ICHRA?

ICHRA stands for Individual Coverage HRA (health reimbursement arrangement).   A health reimbursement arrangement is typically an employer-funded account that sets money aside for medical costs that are not covered by the employer's health plan.   An individual Coverage HRA is different in that it is not coupled with a health plan, but, rather, it takes the place of one.  An ICHRA can be used as an alternative to a traditional group plan offered through an employer. These accounts reimburse employees for premiums for individual health insurance coverage purchased on or off the Exchange, along with other eligible medical expenses. 

Since 2010, small businesses have struggled to offer coverage to employees, with employers that provide health benefits decreasing anywhere from 4%-19%, depending on company size, according to the Kaiser Family Foundation.   ICHRAs will provide more flexibility for employers and provide many people with more options for affordable health care, including those employed by small businesses.  Many employers offer only one health plan to their employees; an ICHRA would allow employees to shop around for the coverage that best meets their needs. 

 

How Does an ICHRA Work?

Employers can begin offering ICHRA plans to employees January 1, 2020.  An ICHRA allows employers to reimburse their staff for medical expenses (along with enrolled family members).  There is no legal maximum, but reimbursement caps can be determined by the employer.  Employees and covered family members must enroll in individual health coverage or Medicare for every month that they are enrolled in an ICHRA.  This coverage can be purchased on or off the Exchange, but it cannot be short-term, limited-duration insurance.  ICHRA benefits are also pre-taxed, just like traditional healthcare benefits; this means that any reimbursement from an employer does not count toward an employee’s taxable wages.  It is worth noting that an individual who is eligible for an ICHRA is not eligible for an ACA premium tax credit for any month when the individual is enrolled in the ICHRA or the individual opts out of the ICHRA but the ICHRA is considered “affordable” under the ACA’s rules.  Employees will be given the option to opt-out annually in order to claim their premium tax credit if the ICHRA is considered "unaffordable."

 

Who Can Enroll in ICHRA?

An ICHRA can be offered by employers of any size.  They can offer this type of account to all of their employees or different classes of employees within their organization, but they cannot offer an ICHRA to an employee who is also offered a traditional health plan. Small and mid-sized companies may decide to offer an HRA in place of a traditional health plan to give employees more affordable options. Larger companies may choose to offer them to different classes of employees, such as:

• Full-time employees

• Part-time employees

• Seasonal employees

• Temporary employees

 

ICHRA Administration

Don't wait until the new year to start designing new benefit offerings for your team!  Let RedQuote get the ball rolling for you now.  Beginning January 1, 2020, RedQuote will administer ICHRAs for employers, ensuring that employees are notified of the ICHRA’s effect on the Premium Tax Credit and are provided annual opportunities to opt-out, as well as assist individuals in finding coverage through new ICHRA benefits.  Using an ICHRA benefit may be the perfect solution for your company, offering flexible and affordable healthcare coverage to your employees.  Not only do we offer ICHRA administration, but we also provide Commuter, HRA, FSA, and COBRA benefits administration and COBRA outreach services.   Whatever you're looking for, we've got you covered.  Contact the RedQuote team today to start designing a new plan and have it in place for the new year!  

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Published Sep 9, 2019.