An Individual Coverage Health Reimbursement Arrangement, also known as ICHRA coverage, is a type of healthcare plan that employers of all sizes can set up to reimburse their employees for a set amount of their individual premiums on health insurance, as well as qualified medical expenses, without being taxed.
Setting up an ICHRA is relatively straightforward. Employers simply set their budget for benefits and ask their employees to choose a health plan. The employer then reimburses employees in their paychecks for the plan they choose. When an employee incurs a medical expense, they can supply a receipt for it and receive reimbursement.
Compared to other types of HRAs, such as QSEHRAs, the ICHRA model is attractive to more employers because it provides greater flexibility in designing the plan. Instead of offering a one-size-fits-all plan to the employee base, employers can choose to provide different levels of coverage to specific employee classes while enjoying greater limits on tax-free employee reimbursement.
However, there are a few things to remember when choosing ICHRA coverage. Here is a look at the most important factors to consider.
One aspect of ICHRA coverage that makes it so flexible is the ability to create employee classes. This allows employers to design unique benefit solutions that suit certain workforce segments. This means that they could offer more to full-time employees than part-time employees.
However, employers must set classes based on genuine job-based criteria, such as the employees’ geographic location or the number of hours they work. These classes must never be used to discriminate against employees who may be unhealthy, such as establishing an overweight or diabetic class.
Employers should choose a plan that allows them to create the classes that suit their workforce. Some common categories include full-time, part-time, seasonal, salaried, and non-salaried.
Another essential factor to consider when seeking ICHRA coverage is who will administer the plan and the level of service they provide. The cost of administering these plans can vary depending on the services offered.
Employers should ask whether the administrator offers support such as plan documents and summary plan descriptions. ICHRA plan document requirements can be complicated, particularly for employers offering ICHRAs for the first time.
It is also important to determine whether they use a standard claim submission reimbursement model or fintech solutions that see the employer covering the premium at the carrier level.
Meeting Employees’ Needs
Although ICHRA plans are inherently flexible, it is important to assess the healthcare needs of the organization’s employees and their dependents. Employers should also consider their workforce’s preferences when it comes to healthcare.
ICHRA plans should align with employees’ needs. The affordability and availability of individual coverage in the area where the business operates should be considered and compared to the cost of group coverage.
Employers can set up an ICHRA for their business any time throughout the year, but looking for a start date that suits the business’s current plans is essential.
In many cases, an ICHRA will begin during the open enrollment period that runs from November 1st to December 15, as this allows employees to enroll in individual health insurance plans that will be covered by their ICHRA benefits.
In some cases, it may be possible to use a special enrollment period that starts at any time to give a group of employees a chance to find health insurance plans on the marketplace.
For organizations that need to cancel their current group plan at the same time they begin the ICHRA, it is ideal to start the ICHRA one day after the cancellation of their group plan goes into effect.
Employee Allowance Amounts
Employers must choose appropriate ICHRA coverage for their employee base. A few things should be kept in mind when setting this allowance. The first consideration is the organization’s overall benefits budget; an ICHRA does not have minimum contribution requirements or maximum limits.
Organizations should choose employee allowance amounts that suit the different employee classes they have chosen. They can also opt to provide different amounts of allowance based on an employee’s family size or age.
However, those who use age as a factor may only offer a class’s oldest employees up to three times the allowance given to the class’s youngest employees.
Learn More About Tailored ICHRA Coverage from the Experienced Benefits Consultants
ICHRA coverage is an excellent choice for employers seeking an approach to health insurance that benefits all parties involved. To learn more about setting up an ICHRA plan tailored to your needs, contact the experienced benefits consultants at Business Benefits Group (BBG) today.