Health Benefits Alternative - What is an ICHRA

What is an ICHRA?

  An ICHRA (Individual Coverage Health Reimbursement Arrangement) is a company-funded health benefit that reimburses employees for healthcare expenses. Unlike a Qualified Small Employer Health Reimbursement Arrangement (QSEHRA), the ICHRA is available for businesses of any size. ICHRAs have been available to business owners since 2020. Both big and small businesses – as well as nonprofits, churches, and other employers – can reimburse employees tax-free for the cost of their individual health insurance premiums and other healthcare expenses. An ICHRA is a way to attract top talent and works as a stand-alone
benefit or as a part of your businesses benefit program along with standard small group insurance. In this case, the company provides some classes of employees a small group insurance plan and other classes an ICHRA.

How does the ICHRA process work?

  When you choose an Individual Coverage HRA for your staff, you decide the amount of the monthly allowance you provide your employees.  Your employees then pay for their individual health insurance coverage and other qualified expenses, and you reimburse them up to the allowance amount for those costs. Keep in mind that all ICHRA payments you make are on a pre-tax basis, which means you pay no payroll or income taxes on the payments.

Which businesses are eligible for an Individual Coverage HRA?

  As a business owner, you determine which employees are eligible for your ICHRA, by choosing which class(es) of employees are eligible when setting up ICHRA plans.

There are 11 different employee classes:

• Full-time employees
• Part-time employees
• Seasonal employees
• Temporary employees who work for a staffing firm
• Salaried employees
• Hourly employees
• Employees covered under a collective bargaining agreement
• Employees in a waiting period
• Employees who work abroad
• Employees in various locations, based on rating areas
• Any combination of the above

  You are not required to offer an ICHRA to all your employees. For example, you can offer group insurance to one class of employees
and an ICHRA to another. If you choose to provide this option, you must meet minimum class size standards for the employees eligible for the ICHRA. You may also offer different reimbursement allowances to your various classes. For example, you can offer one group of employees $500 per month, and another $250 per month. You may choose to allow a different allowance amount based on the employees’ age and family size. For instance, you can offer single, full-time employees an allowance of $500 and full-time employees with families $1,000. You may also offer different amounts based on the age of the employees within a class. In this instance, you can only offer higher amounts (up to 3x higher than the youngest employees in a class) to older employees. While amounts can differ based on age and family size, each employee in a specific class must be offered the ICHRA on the same terms.

Benefits of an ICHRA for your employees

  An ICRHA can be an attractive option for employees, allowing you to attract top talent by providing the benefits employees want today. Some of the benefits include:

• Employees can choose plans that include their own doctors
• Employees can add other benefits like vision and dental insurance
• Each employee can choose the plan that works best for them
• Other healthcare expenses may be reimbursed along with plan premiums
• Employees own their health plan and can take it with them if they change jobs

  By offering a flat contribution to the teams health care you allow them to find the plan that is best for them and takes the hassle out of shopping group plans for the company.  It also sets the budget for you to be able to offer a benefit to the team.

To learn more about setting up an ICHRA for your team give us a call at (813) 367-4616.  You can also schedule a time that works best for you below.