Navigating the world of health insurance can be a complex and confusing task for many employees. With the relatively new introduction of the Individual Coverage Health Reimbursement Arrangement (ICHRA), employees often have even more questions about how it works and what it means as opposed to the traditional group plan they’ve been used to as their healthcare coverage. Let’s dive into the most commonly asked questions about ICHRA health insurance and provide clear and concise answers that benefits consultants and HR professionals can use to help everyone understand this fresh option.
What is an ICHRA?
An Individual Coverage Health Reimbursement Arrangement (ICHRA) is a type of employer-sponsored health benefit arrangement that allows employers to reimburse their employees for qualified medical expenses, including individual health insurance premiums. Unlike traditional group health insurance plans, ICHRA allows employers to define a budget for each employee, which the employee can use to purchase individual health insurance coverage of their choice. ICHRAs provide employees with flexibility and portability, as they can keep their coverage even if they change jobs.
Employers set up the ICHRA, determine the amount of contribution, and establish the eligibility criteria. The contribution amount can vary based on factors like age, family size, and geographic location. ICHRAs are available to employers of all sizes. By offering an ICHRA, employers can provide a health benefit to their employees while controlling costs and customizing the benefit to individual needs.
How does ICHRA differ from traditional group health insurance?
Unlike traditional group health insurance plans, where the employer selects and provides a specific health insurance plan for employees, ICHRAs allow employees to choose and purchase their individual health insurance coverage on the marketplace. Employers then reimburse employees for their premium expenses up to a predetermined amount.
Can I use ICHRA to cover my family members?
Yes, ICHRA can be used to cover eligible family members, including spouses and dependents. The employer determines whether ICHRA funds can be used for family coverage and the reimbursement amount available for family members.
What happens if I don't spend the full amount allocated by my employer for ICHRA?
Unused funds from the ICHRA are typically not available for employees to keep or roll over into the following year. Employers have the option to either allow employees to carry over a limited amount of unused funds or to forfeit them at the end of the coverage period. Employees should check with their employer or plan administrator regarding the specific rules for their ICHRA.
Can I use ICHRA funds to pay for non-health insurance expenses?
ICHRA funds can only be used for eligible health insurance premiums and qualified medical expenses. These expenses may include doctor visits, prescription medications, and other medical services and healthcare products outlined by the Internal Revenue Service as eligible for reimbursement.
Are there any restrictions on the type of health insurance I can choose with ICHRA?
No, employees can select any individual health insurance plan as long as it meets the minimum essential coverage requirements set by the Affordable Care Act (ACA).
Can the ICHRA allowance amount be adjusted at any time?
No, an ICHRA reimbursement amount is established at the start of a plan year and will remain the same for a full 12-month period. Any changes such as allowance amount that would affect employees’ decision to opt in or out of the benefit cannot be changed mid-plan year.
Will ICHRA affect my eligibility for premium tax credits?
Eligibility for premium tax credits under the ACA is determined by various factors, including household income and access to affordable employer-sponsored coverage. If your employer's ICHRA is considered affordable and provides minimum essential coverage, you will not be eligible for premium tax credits. It is recommended to consult with a tax professional or healthcare marketplace for personalized advice regarding premium tax credits.
Will I be offered COBRA if I leave my job?
You will be offered COBRA, but with an ICHRA, COBRA coverage isn’t generally necessary because the employee owns their benefits plan and can freely take it with them when they change jobs, with no time limit on coverage.
Employers and benefits consultants already know that ICHRAs can offer employees a unique and flexible approach to healthcare coverage—and using these questions and answers, they can provide clarity and guidance to employees regarding the basics of ICHRAs, empowering them to make informed decisions about their health insurance options.