The Individual Coverage Health Reimbursement Arrangement (ICHRA) is a revolutionary approach to employee benefits, offering flexibility for employers and employees alike. But if your ICHRA claim was denied, you may be wondering why. There are a few reasons for this, which often stem from simple misunderstandings or miscommunications about eligibility and documentation. Here’s the top three reasons why an ICHRA claim gets denied and actionable steps you can take to address these issues.

1. Claim Was Denied for Wrong or Incomplete Premium Information

One of the most frequent reasons for claim denials is incorrect or incomplete information. This can include missing details about the plan, incorrectly filled forms, or empty fields on a form.

Another reason for claim denials is documentation that doesn’t match, such as inconsistent dates or incorrectly filled claim details. For example, an employee might submit an invoice for one month and then request reimbursement for a different month.

Incorrect information submitted often includes:

  • Payment Receipt Confirmations: These are generally insufficient for claim substantiation.
  • Copies of Renewal Letters: Renewal letters do not typically provide the necessary information for claim processing.
  • Copies of Enrollment Letters: Enrollment letters may not contain the specific premium amount and dates required for reimbursement.

Quick Fix

To ensure a smooth claim process, premium or out-of-pocket claims* submissions should include the following information:

  • Current Service Month Dates: These dates should match the date(s) requested for reimbursement.
  • Amount of Premium: The exact premium amount must be clearly stated.
  • Name of the Carrier and Participant: Accurate identification of the insurance carrier and the employee is crucial.

2. Claim Was Denied for Ineligible Insurance Plan

ICHRA only reimburses premiums for qualified individual ACA Metal health insurance plans. Plans that don’t meet eligibility criteria, such as short-term health plans or health-sharing ministries, are not covered.

Ineligible insurance plans typically include:

  • Medicaid: A government-funded program that is not considered individual health insurance.
  • Health-Sharing Ministries: These organizations do not typically meet the definition of “minimum essential coverage” or meet Minimum Value under the Affordable Care Act.
  • Limited Liability Plans: These plans often have limited coverage and may not qualify as ACA-compliant health insurance.
  • Non-ACA Metal Plans: Plans that do not meet the minimum essential coverage requirements of the ACA are generally not eligible.
  • Renewable Short-Term Plans: These plans do not comply with Affordable Care Act Standards and can discriminate against consumers with preexisting conditions.
  • ACA Plans with Advanced Premium Tax Credits (APTC): Employees cannot receive both APTC and ICHRA reimbursement for the same plan.

Quick Fix

Talk to your employer about offering a healthcare plan that falls under one of the four metal categories offered through the Affordable Care Act: bronze, silver, gold, and platinum. A benefits administrator can help narrow down a plan that fits your employer’s needs and budget.

3. Claim Was Denied for APTC and Insurance Discounts

Employees cannot receive a discount on their premium and simultaneously participate in their employer’s ICHRA plan. Employees who receive APTC through the Health Insurance Marketplace are not eligible for ICHRA premium reimbursements for the same plan. This is strictly prohibited by IRS regulations. They must choose the option that best suits their individual needs and financial situation.

Quick Fix

An as employee, if you receive a discount on your premium but still want to participate in your employer’s ICHRA plan, you’ll need to contact your insurance carrier to request the removal of the discount or APTC from your plan.

For family coverage, you can enroll in two individual health plans—one for you to participate in ICHRA and another for your family, potentially utilizing APTC for the family plan. This approach maximizes the benefits of both programs.

 

Avoiding Future ICHRA Claim Denials

While ICHRA offers tremendous flexibility and cost control for employers and employees, claim denials can be frustrating. Employers and employees should work together to avoid future pitfalls. Employers need to proactively communicate with employees and offer clear guidelines and accessible support systems. Employees must pay strict attention to details and adhere to plan requirements to ensure seamless reimbursement. With these strategies in place, ICHRAs can deliver on their promise of transforming healthcare benefits into a more personalized, efficient, and rewarding experience for all.

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*Some employers may also include out-of-pocket expenses along with individual premiums for reimbursement. This can create a more comprehensive and generous ICHRA benefit. Find more information on IRS Substantiation requirements here: Health FSA and the IRS Substantiation Requirements