What is ICHRA? A Guide to Individual Coverage Health Reimbursement Arrangements
In the evolving world of employee benefits, businesses have experienced rapidly increasing prices and ever higher deductibles, Individual Coverage Health Reimbursement Arrangements (ICHRA) have emerged as a flexible, customizable way for employers to provide health coverage. But what exactly is an ICHRA, and how does it differ from traditional health insurance options? In this article, we’ll break down what you need to know about ICHRA, from the basics to benefits for both employers and employees.
Understanding the Basics:
ICHRA is a different type of employee health plan. ICHRA is an account established by employers to reimburse employees tax-free for their individual health insurance premiums and other qualified medical expenses. Instead of offering a traditional group health insurance plan, employers set a monthly allowance for employees to buy individual insurance coverage directly from an insurance provider or the Affordable Care Act (ACA) marketplace.
Here’s how it works:
Employers Set a Budget:
Employers decide how much to contribute to employees’ healthcare purchase. This amount can vary by class of employee (e.g., full-time vs. seasonal, by level or by geographic location).
Employees Choose Their Plans:
Employers decide how much to contribute to employees’ healthcare purchase. This amount can vary by class of employee (e.g., full-time vs. seasonal, by level or by geographic location).
Claims Submitted and Reimbursements Made:
Employees submit claims for their premiums and qualified medical expenses, which are reimbursed to them up to the set allowance.
How ICHRA Differs from Traditional Health Insurance:
Unlike traditional group insurance, ICHRA allows more both employers and employees choice and personalization. Employees select a plan that meets their individual or family needs, while employers avoid the high costs and complexities of managing a group plan. ICHRA has no minimum participation requirements, allowing businesses of any size to offer health benefits, even if only a few employees choose to participate. And, because each employee is participating in their own plan, employers avoid the financial strain of annual premium increases they might otherwise experience with a traditional group health insurance renewal.