ICHRA

Explore the power of the Individual Coverage HRA as a dynamic alternative to conventional group health insurance. With an ICHRA plan, you gain the flexibility to provide tax-free premium reimbursements to your employees. This approach empowers your team to select personalized health plans from the local market while enjoying tax-free reimbursements through the ICHRA structure.

How ICHRAs came about

The genesis of Individual Coverage Health Reimbursement Arrangements traces back to the evolution of traditional HRAs. Unlike conventional HRAs, which primarily cover out-of-pocket healthcare expenses, ICHRAs break new ground by offering employers a tool to reimburse employees for insurance premiums on a tax-free basis.

The journey began in 2016, when Congress expanded the HRA landscape by introducing the Qualified Small Employer HRA (QSEHRA). While QSEHRAs allowed smaller employers to merge HRAs with individual market coverage, limitations loomed large: they were available only to employers with fewer than 50 full-time employees, and they mandated exclusivity, barring any other health coverage including vision and dental plans. Those restrictive qualifiers rendered the solution impractical for many.

Recognizing the need for broader applicability, a pivotal decision in 2019 gave rise to two HRAs: the Individual Coverage HRA and the Excepted Benefit HRA. These removed myriad constraints, opening the door for employers of all sizes to integrate with the individual market.

Two structures, two purposes

• Individual Coverage HRAs are connected with specific individual market coverage and Medicare, but do not integrate with group health plans.
• Excepted Benefit HRAs are non-integrated and versatile, serving employees covered under an employer-sponsored group health plan and spanning copays, deductibles, dental and vision coverage.

What this changes for plan design

This shift gives employers unusual flexibility in plan design. Establishing reimbursement limits and determining employee eligibility are now customizable aspects of a tailored benefits strategy — you can set different contribution amounts across permitted employee classes rather than buying one plan for everyone.

The trade-off worth understanding up front: your cost becomes predictable, but employees take on plan selection. That works well for distributed workforces and mixed demographics, and works less well where employees expect a single curated plan.

What’s included

• ICHRA eligibility and class structure design
• Affordability analysis by employee class
• Reimbursement limit modeling
• Individual market plan shopping support
• Substantiation of individual coverage
• Required participant notices
• Payroll and tax coordination
• Annual renewal review

Common questions