What Is an Individual Coverage Health Reimbursement Arrangement (ICHRA)?

An individual coverage health reimbursement arrangement (ICHRA) allows employers to reimburse employees for premiums they pay for personal health insurance. Employers can reimburse employees for individual market premiums regardless of the company size.

Under the newest regulations, there is more flexibility for how much reimbursement an employee can receive or what type of coverage they can choose. To find out what options are available for your company, contact your health insurance broker in your state.

What you Need to Know About ICHRAs

As the “reimbursement” part of its name implies, ICHRA is based on reimbursing employees for insurance rather than buying it for them. The way ICHRA works is simple:

  • Employers design their plan, including defining eligible employees and establishing reimbursement amounts.
  • Employees purchase the individual plans they want – ICHRA works with all off- and on-market major medical plans and Medicare Parts A+B or C, catastrophic plans for those under 30, and student health insurance.
  • Employees submit claims for reimbursement.
  • Employers reimburse employees for valid claims.
  • Employers outsource administrative functions like verifying coverage and compliance.

Benefits and Features of ICHRAs

There are several advantages of ICHRAs

ICHRAs Satisfy Employee Health Coverage Regulations

Employers can use an ICHRA to satisfy the employer mandate as long as the ICHRA benefit is substantial enough to make an individual health insurance plan affordable.

No Limits on Reimbursements

There are no limits on how much an employer can reimburse under an ICHRA. So the employer can create their company standards or work out an agreement with an employee.

Choose One Plan

An employer cannot offer an employee a choice between a group health plan and an ICHRA. They can only offer one or the other. An employer can offer both a group health plan and an ICHRA, but they have to be offered to different classes of employees so that no employee has an option to choose between the group plan and the ICHRA.

Special Enrollment Period Eligibility

Employees who become eligible for reimbursement of premiums under an ICHRA (or QSEHRA) are eligible for a special enrollment period during which they can enroll in an individual market health plan.

Qualified Medical Expenses

ICHRAs can be used to reimburse qualified medical expenses and individual market health insurance premiums if the employer opts to allow this. But if ICHRA reimbursement is available for pre-deductible expenses, the employee would not be eligible to contribute to an HSA, even if they enroll in an individual market HSA-qualified health plan.

Cafeteria Plans

If the ICHRA benefit covers some, but not all, of the employee’s premium in the individual market, the employer can allow the employee to use a pre-tax salary reduction to pay the employee’s share of the premium, but only if the plan is purchased outside the exchange.

If the employee purchases on-exchange coverage with the ICHRA funds, the employee cannot use a pre-tax salary reduction to fund the remainder of the premium.

ICHRA Reimbursement Limits

There are no limits to how much an employer can offer reimbursement under ICHRA. With ICHRA, employers can offer as much or as little as they’d like as long as it’s offered fairly to each class. In addition, employers can choose what they want their ICHRA to reimburse:

  • Insurance Premiums Only
  • Insurance Premiums + Qualified Medical Expenses
  • Qualified Medical Expenses Only

Contact Insurance Enterprise for Premier Health Insurance

If you have questions about health insurance and need quotes, contact Insurance Enterprise at 888-350-6605. Speak to a licensed agent and find out more about how you can get an affordable health insurance plan.