What is ICHRA?
An ICHRA is a company-funded health benefit that is offered to eligible employees with a tax advantage. ICHRA is the short form for an individual coverage health reimbursement arrangement. It may also be called an individual integrated HRA. The plan provides employees with reimbursement funds for personal health care expenses incurred during the policy term. Though approved in October 2018, enrollment wasn’t available until January 2020. Businesses of any size can take advantage of the program, and companies are allowed to determine employee eligibility and allowance amounts. This is a monthly allowance of tax-free funds that employees can use to purchase individual health insurance or to pay for health care services.
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When do I need to be aware of ICHRA?
Businesses can offer an ICHRA as an alternative to HRAs, which have been limited by government mandates and regulations. Employees, whose eligibility is set by a company, can enroll in the plan to receive reimbursement for health care services that were paid for by the individual. Employees submit the necessary paperwork to the company to receive the funds, with caps and allowances determined by the company as well.
What is important to know about ICHRA?
Eligibility is for employees and their families, but only if they maintain coverage with an individual health insurance policy. Reimbursements stop when coverage is lost. This is a personalized, account-based health plan option for companies that want to set a comfortable budget for health expenses without sacrificing the health needs of the employees. There are some other important items you should know about an ICHRA:
- Participating in an ICHRA could restrict premium tax credit eligibility, and employees are granted opt-out requests without penalties under the Affordable Care Act.
- Businesses must choose between an ICHRA or either the QSEHRA or HRA, though separate classes of employees could be offered one of the other within the same company.
- Employers can choose the structure of reimbursement, from deciding on employee eligibility through age, salary status, full or part-time status, and more.