Understanding Individual Coverage HRA (ICHRA)
What is an Individual Coverage HRA?
An Individual Coverage Health Reimbursement Arrangement (ICHRA) is a type of health benefit that allows employers to reimburse employees for personal health insurance premiums and medical expenses on a tax-free basis. It was established by the Trump administration’s Departments of Treasury, Labor, and Health and Human Services as a way to provide more options for employers to offer health benefits to their employees.
How does it work?
With an ICHRA, employers set a budget to reimburse employees for their healthcare expenses. Employees then purchase their own individual health insurance plans and submit their premium receipts and other eligible expenses for reimbursement from their employer. The reimbursements are tax-free for both the employer and the employee.
Eligibility and Requirements
Employers of all sizes can offer an ICHRA to their employees, as long as they do not offer a traditional group health plan. Employees must be enrolled in an individual health insurance plan that meets the minimum essential coverage requirements set forth by the Affordable Care Act (ACA).
Compliance with ACA
ICHRA plans must comply with all ACA regulations, including not discriminating based on health status and offering coverage to all full-time employees. Employers must also provide a Notice of ICHRA to their employees before the start of each plan year to inform them of the reimbursement amount available to them.
Advantages of ICHRA
One of the main advantages of ICHRA is that it allows employees to choose their own health insurance plans that best suit their needs, rather than being limited to the options offered by their employer. It also allows employers to provide a valuable health benefit to their employees without the administrative burden and cost of maintaining a traditional group health plan.
Flexibility for Employees
ICHRA gives employees the flexibility to select the health insurance plan that fits their unique healthcare needs, whether it be a high-deductible plan, a comprehensive plan with a wider network, or a plan that covers specific medical conditions or treatments.
Overall, an Individual Coverage HRA provides both employers and employees with flexibility and cost savings in providing and receiving healthcare benefits. By offering employees the opportunity to choose their own health insurance plan, ICHRA allows for greater individualization and satisfaction in the healthcare benefits offered in the workplace.
1. “Final Rule for Health Reimbursement Arrangements (HRAs) and Other Account-Based Group Health Plans” by the U.S. Department of Labor, Department of Health and Human Services, and Internal Revenue Service. (June 13, 2019) https://www.federalregister.gov/documents/2019/06/20/2019-12571/health-reimbursement-arrangements-and-other-account-based-group-health-plans
Q: Can an ICHRA be offered alongside a traditional group health plan?
A: No, an ICHRA cannot be offered alongside a traditional group health plan. Employers must choose to offer either one or the other to their employees.
Q: Are there any limits on the amount of reimbursement offered through ICHRA?
A: Yes, there are annual caps on the amount of reimbursement that can be provided through ICHRA, which are determined based on age and family size.