ICHRA

  • Employers of all sizes can offer the Individual Coverage HRA (ICHRA). Group health insurance can also be offered, but not to the same class of employees that are offered the ICHRA. For example, the business can offer full-time employees group health and part-time employees an ICHRA, but they cannot offer full-time employees a choice between group health insurance and the ICHRA.

    • Employees (and their dependents) must be enrolled in individual health insurance coverage (other than excepted benefits like dental, vision, short-term plans) or Medicare Part A (Hospital Insurance) and Medicare Part B (Medical Insurance) or Medicare Part C (Medicare Advantage) to use the funds. Cannot integrate with group coverage (including spouse’s plan), health care sharing ministry or TRICARE.

    • Individual health insurance coverage can be bought on-Exchange through the Marketplace or off-Exchange. Use our portal to purchase here BenefitsAssist, inc. | Fast, Easy ACA Enrollment (healthsherpa.com).

    • No traditional Group Health Plan offered to same employees

    • Employer sets the annual reimbursement max

    • Same terms apply to all employees within a class - percentage of premium not permitted

    • Right to opt out (annually and at termination of employment)

    • Must substantiate enrollment in individual health insurance coverage or Medicare (annually and ongoing for each claim) - attestation is allowed

    • Annual notice 90 days before start of plan year - see https://www.cms.gov/files/document/hra-model-noticepdf

    • ICHRA is subject to COBRA

    • Discrimination testing only applies if reimbursing medical expenses

    **ICHRA coverage or offer of "affordable" ICHRA bars eligibility for Premium Tax Credit - see HealthCare.gov HRA affordability tool

    NOTE: This is not a complete listing of ICHRA rules. Consult your legal or tax counsel for complete details - see Individual Coverage Health Reimbursement Arrangements (ICHRAs) | HealthCare.gov

  • The ICHRA must be offered to one or more permissible "classes" of employees. Employers can structure eligibility based on the employee classes defined by law. However, if employers also provide group coverage and choose to structure eligibility based on full-time or part-time status, hourly or salaried pay structure, or geographic location, the employee classes must meet a certain size requirement.

    Minimum employee class sizes are:

    • 10 employees for employers with fewer than 100 employees

    • 10 percent of the total number of employees for employers with 100 to 200 employees

    • 20 employees for employers with more than 200 employees

    If an employer offers an ICHRA to employees within a permissible class, it must offer the ICHRA in the same amount and on the same terms to all employees within that class, subject to several exceptions. These exceptions allow the amounts provided in an ICHRA to a class of employees to vary based on employees’ ages (i.e., more dollars available as age increases) and number of dependents (i.e., more dollars available as number of dependents increases). In addition, an employer may "grandfather" a class of employees in a traditional group health plan and offer an ICHRA only to new employees hired in that class. Keep in mind that depending on what benefits the ICHRA ultimately offers, it may still have to comply with non-discrimination rules under Internal Revenue Code Section 105(h).

    If union class selected, Union employees must be covered by a collective bargaining agreement where accident and health benefits were the subject of good faith bargaining.

    Retirees can be included and are treated based on the class at time of termination.

    Permissible classes include:

    • Full-time (at least 30 hours per week on average)

    • Part-time (less than 30 hours per week on average)

    • Seasonal

    • Salaried

    • Hourly

    • Temporary employees working for a staffing firm

    • Employees covered under a collective bargaining agreement

    • Employees in a waiting period

    • Foreign employees who work abroad

    • Employees in different locations, based on rating areas

  • Employees (and their dependents) must be enrolled in individual health insurance coverage (other than excepted benefits like dental, vision, short-term plans) or Medicare Part A (Hospital Insurance) and Medicare Part B (Medical Insurance) or Medicare Part C (Medicare Advantage) to use the funds. Cannot integrate with group coverage (including spouse’s plan), health care sharing ministry or TRICARE.

    Individual health insurance coverage can be bought on-Exchange through the Marketplace or off-Exchange. Use our portal to purchase here BenefitsAssist, inc. | Fast, Easy ACA Enrollment (healthsherpa.com).

    The employer is able to deduct claim reimbursements while the employee is not taxed on the eligible disbursements. Reimbursable expenses can include the below:

    • Individual health insurance premiums (other than excepted benefits like dental, vision, short-term plans), Medicare Parts A, B, C, and D premiums, Medicare Supplement premiums

    • Subject to plan design - 213(d) expenses such as:

      • Doctor’s office and prescription drug co-pays

      • Medical deductibles and co-insurance

      • Approved over-the-counter items

      • Vision and dental costs

      • Chiropractic services