To sum it up, ICHRA allows both large and small businesses the freedom to offer its employees a specific amount of tax-free money to be used towards the purchase of individual medical insurance. Along with the option to buy individual health coverage, employees may also be given the option to use that money towards out of pocket expenses. ICHRA provides freedom of choice for employees, controls cost for all parties and directly addresses ACA compliance for Applicable Large Employers.
Companies often use HRAs to reimburse their employees’ healthcare expenses associated with group insurance. This strategy is most often used to ward off increasing premium costs but with most employers seeing tremendous increases in premium a new tactic is needed.
The Affordable Care Act (ACA) limited an employer’s ability to offer a contribution towards their employee’s individual health insurance premium. The qualified small employer HRA (QSEHRA) did help to fix some of the regulations imposed by the ACA, but there were still challenges for employees seeking relief from their expensive one-size-fits-all group health plan.
Then in 2017, the agencies (Departments of Treasury, Labor and Health and Human Services) began a mission to expand business’ use of HRAs for individual insurance. After almost 2 years of planning new rules were released establishing ICHRA as a viable option for large and small employers beginning January 1, 2020.