Say hello to the Individual Coverage Health Reimbursement Arrangement, or ICHRA, an employer-funded, tax-advantaged health benefit that is used to reimburse employees for individual health insurance premiums, and healthcare expenses.
The ICHRA was finalized as a new regulation from the Departments of Treasury, Labor and Health and Human Services in June 2019, and will become available beginning January 1, 2020.
The main functions of the ICHRA are:
-Businesses of all sizes can reimburse medical expenses (tax free) to employees who have individual health coverage.
-It allows these businesses to make distinctions in eligibility and contribution amounts among employees based on certain criteria, such as classes.
Businesses can structure employee eligibility based on the following defined classes:
- Full-time employees
- Part-time employees
- Salaried employees
- Hourly employees
- Seasonal employees
- Temporary employees who work for a staffing firm
- Employees covered under a collective bargaining agreement
- Employees in a waiting period
- Foreign employee who work abroad
- Employees in different locations, based on rating areas
- A combination of two or more of the above classes
To participate in the ICHRA, employees must purchase individual health insurance or be covered by
Medicare Parts A and B or Medicare Part C, and meet the eligibility requirements.
The business can choose its monthly contribution to make available to employees. There is no minimum or maximum contribution limits and they can offer different levels of contribution to different employees based on:
-Their class (see above list)
-Their family size
Employees submit their incurred eligible expense information along with proof of individual health coverage to their employer, and the employee is reimbursed according to their level of contribution, tax-free. Flyte HCM makes this process hassle-free for employers with ICHRA Administration.
So is the ICHRA benefit right for your business? Reflect on the following aspects of the ICHRA. As with everything, there are both pros and cons. Here are a few of them:
- Any sized business can offer the benefit to their employees
- There are no minimum or maximum employer contribution limits
- Offering the ICHRA satisfies the ACA’s Employer Mandate, as long as the affordability requirements are met
- Businesses have more control over their benefits budget
- Employees find the health coverage that best fits their individual needs
- The ICHRA is simple to administer when you work with a benefits administrator*
- Participants in the ICHRA are not eligible for premium tax credits
- Educating your employees how the ICHRA works will be crucial
- The ICHRA does not work with health care sharing ministry plans or for employees covered by a spouse’s group plan
Editor’s Note: This article is not a complete list of all the aspects of the ICHRA, it is a simple summary. Check out our FAQ page on ICHRA.com for some helpful information. For help with additional questions, please contact Flyte today and we would be happy to assist!