Moving from traditional group health plans to an Individual Coverage Health Reimbursement Arrangement (ICHRA) can feel daunting for companies and their HR teams. With a lot of moving parts to consider during the process, some teams might have questions that are keeping them from making the change or that they wish they’d asked before doing so. Let’s look at some of the most common issues that come up for employers when moving to an ICHRA to help you and your employees take advantage of all it has to offer.
1. Know What Is and Isn’t Reimbursable Under an ICHRA
ICHRAs allow employers to provide reimbursements for health insurance premiums and certain medical expenses, like co-pays, prescriptions and some over-the-counter drugs, eye exams and contact lenses, breast pump and lactation supplies, chiropractic services, and more. Oh, and did we mention they can also cover a portion of Medicare premiums? Because they do.
2. No Minimum or Maximum Employer Contribution Limits
Employers have the flexibility to contribute different amounts to different employee classes (full-time versus part-time, salaried versus hourly, etc.). This is especially helpful if you have a distributed workforce where plans are more expensive in one region than another. You can contribute more to the employees in the more expensive regions to ensure everyone has equal buying power regardless of geography.
3. ICHRAs Are Not Considered Income
At some point, you may have considered just giving employees money to put towards the plan of their choice, but refrained once you learned it would be considered income and taxed by the IRS. Good news: because ICHRAs aren’t considered income, they’re a way to give tax-free money to employees so they can buy the plan that best suits their needs.
4. ICHRAs Are Inherently ACA Compliant for Minimum Coverage
While ICHRAs themselves are not qualified health plans (QHPs), they work with and must be accompanied by a QHP. And because all QHPs meet the Affordable Care Act’s (ACA) minimum essential coverage requirement, ICHRAs are inherently ACA compliant in this regard (and one less concern on your HR team’s plate).
5. Yes, Business Owners Can Participate in Your ICHRA, Too (in Some Cases)
Are you the owner of a C-corp or a nonprofit business? Great! That means you’re eligible to participate in your company’s ICHRA and have your own healthcare expenses reimbursed. If you’re considered an employee of your company, you (and your dependents) can participate in the ICHRA. (S-corp owners who own more than 2% of the company are considered self-employed and ineligible.)
6. Employee Education Is Key to a Smooth Transition
Your employees are inevitably going to have a lot of questions about moving from a group plan to an ICHRA, especially long-tenured employees or high plan utilizers. It’s crucial to ensure that you provide them with the information they need to understand the process of comparing and choosing plans on the individual market, so they’re empowered to select the best plan for their own health needs and those of their families. It’ll go a long way towards making the transition a smooth one for them and for your HR team.
