The term ICHRA stands for Individual Coverage Health Reimbursement Arrangement. It’s a type of health reimbursement arrangement (HRA) introduced by the U.S. government to provide employees with more flexibility in how they use their health benefits. At Paragon, we haven’t seen much of this yet in New York, but we have clients in the mid-west who use ICHRA.
Here’s a brief overview of the ICHRA plan:
1. What does ICHRA mean for Individual coverage?
Unlike traditional group health insurance plans offered by employers, an ICHRA allows employers to reimburse employees for premiums and out-of-pocket costs related to individual health insurance plans that employees purchase on their own. The employee has the option to choose from a variety of different types of health insurance plans.
2. How does ICHRA help control employer contributions?
Employers set a fixed amount of money that they will contribute to employees’ ICHRA accounts. Employees can use these funds to reimburse themselves for health insurance premiums and qualified medical expenses.
3. Who is given more flexibility?
Employees have the freedom to choose their own health insurance plans, which can be particularly beneficial for those who might prefer different coverage options or who have specific healthcare needs. Employees can manage their own health care plans rather than the employer.
4. What are the tax benefits?
Reimbursements through an ICHRA are generally tax-free for employees, and contributions made by employers are tax-deductible.
5. What are the ICHRA regulations with Eligibility and Compliance?
Employers must ensure that their plans comply with various regulations, including providing a minimum level of essential coverage and offering the plan to all eligible employees.
6. What are the ICHRA regulations with ACA Compliance?
Employers offering ICHRA need to ensure that the combined cost of the individual health insurance premiums and any other out-of-pocket expenses do not exceed ACA affordability thresholds. Employers are not required to meet the affordability criteria directly with ICHRA, but employees need to ensure their individual plans meet affordability standards. With ICHRA, ALEs can meet their obligations by offering reimbursement arrangements that enable employees to purchase individual health plans. The employer must ensure that their plan design allows employees to use the reimbursement for minimal essential coverage. Employers offering the plan must provide a written notice to employees detailing the arrangement and how it works, including information on the individual health insurance marketplace. They must also follow reporting requirements under IRS rules, including providing the required forms to employees and the IRS.
In summary, the ICHRA model can be a compliant and flexible way for employers to offer health benefits under the ACA. It allows employees to choose individual coverage while ensuring that the employer’s plan aligns with ACA requirements. Stay tuned for Paragon’s next blog post, where we dive into details on how ICHRAs affect the 1095-C for employers preparing federal filings for the ACA.
How can Paragon Compliance help?
Let us help you – please reach out to clientservices@paragoncompliancellc.com for a quote or call us today!