If your business is planning to offer an individual coverage health reimbursement arrangement (ICHRA), there are some important items to consider. With the creation of the ICHRA, certain regulatory guidelines were provided to ensure the plan is being administered compliantly. These guidelines range from employee eligibility to plan documents and employee notices.
This post will cover important rules businesses should keep top of mind when offering an ICHRA.
1. The ICHRA notice requirement
According to federal regulation, businesses offering an ICHRA are required to adhere to a 90-day notice period before each plan year. That means, 90 days before the ICHRA’s start date, HRA administrators must notify employees about the newly available benefit and that they are eligible to participate.
The 90-day notice must be provided every year the business chooses to offer the ICHRA.
For employees who become newly eligible (like employees who gain eligibility after the beginning of the plan year, or newly hired employees), the notice requirement is different. A business has the option to provide the notice any time until the first day the employee’s ICHRA coverage begins. It is best practice to provide notice as soon as possible. That ensures the employee has time to review their coverage options and select an insurance plan.
These are the items the notice must include:
- A description of the terms of the ICHRA.
- A statement of the right of the participant to opt out of and waive future reimbursement under the HRA.
- A statement on how the ICHRA will affect premium tax credit (PTC) availability, whether the employee opts out, or chooses to accept the benefit.
- A statement that the participant must inform any exchange to which they apply for advanced premium tax credit (APTC) of relevant information.
- A statement about how the ICHRA differs from other HRAs.
- A statement about the availability of a special enrollment period (SEP) for employees and dependents who gain access to the HRA.
- A statement about how the participant can find assistance for determining their individual coverage HRA affordability.
- A statement that the ICHRA can be integrated with Medicare. Employees must be informed that Medicare can be integrated with the ICHRA.
- Contact information of an individual or a group of individuals for the participants to contact with questions regarding their ICHRA.
2. ICHRA Plan documents
The ICHRA is considered to be an employee health benefit, and is therefore subject to the Employee Retirement Income Security Act (ERISA).
Under Section 402 of ERISA, the regulations state that every employee benefit plan must be “established and maintained pursuant to a written instrument” (ERISA, 2011). This means employee benefit plans must include a formal document defining the plan. ERISA regulation also requires that the plan document is made available to employees and their families.
Along with the formal plan document, an employee health plan must also include a summary plan document (SPD). The purpose of which is to provide a summary of the full plan document to eligible employees. In general, the plan document is written in complex legal language. The SPD should be written more simply, allowing an average plan participant to reasonably understand it.
While there aren’t any defined penalties for failing to meet these requirements, businesses are subject to IRS fines if participants in an ICHRA ask to see the plan document and the business doesn’t provide them one.
Additionally, the business could be at risk for potential fines if an SPD is not made available to eligible employees within 120 days of the ICHRA’s creation. For employees newly enrolled in an existing ICHRA, the business has only 90 days to deliver the SPD.
The ERISA requires several items to be included in the employee health plan documents. In addition to those, there are several items specific to the ICHRA that businesses should include as a best practice.
Below is a list of the 10 items a business should include in their ICHRA plan documents. (Items that are legally required by ERISA are specified by an asterisk.)
- Named fiduciaries and plan administrators and their responsibilities*
- Eligibility requirements for the ICHRA
- Effective dates of participation
- Description of benefits, both those provided and those excluded
- How the ICHRA is funded and how it makes payments*
- Claims procedures
- HIPAA privacy officers and rules regarding protected health information (PHI)*
- Information on federal mandates*
- The procedure for amending the plan*
- The procedure for plan termination
3. ICHRA Eligibility
Another important thing to know about the ICHRA is how employee eligibility is defined. According to ICHRA regulations, all participants must be covered by individual health insurance to participate in the benefit. In addition, a business may further structure eligibility according to 11 employee classes. They are:
- Employees in a waiting period
- Temp employees that work through a temp agency
- Employees covered under a collective bargaining agreement
- Employees in different locations, based on rating areas
- Foreign employees who are working abroad
- Any combination of the options above
A business is able to limit eligibility to employees that fall into the above-listed categories. Alternatively, a business can choose to offer the benefit to all employees without the use of classes. The spouses and dependents of eligible employees can also participate in the ICHRA, if the business allows.
If the business offers a group insurance plan, it can’t be offered to the same classes of employees that are offered the ICHRA. In other words, an employee can’t be offered both the group plan and the ICHRA. The two plans must be offered exclusively.
4. Individual coverage
As discussed above, eligible employees must have a qualifying individual coverage plan to participate in the ICHRA. That being said, what qualifies as individual coverage?
Individual coverage is an individual health insurance policy, including on-exchange or off-exchange coverage, Medicare Parts A and B, or Medicare Part C. An employee can be the primary policyholder or they can be covered under a family member’s individual policy.
Policies that aren’t considered individual coverage include the following:
- Group health insurance
- Short-term medical insurance
- Ministry share plans
5. Substantiating individual coverage
Another important rule to note is that employers offering an ICHRA must take reasonable steps to ensure that eligible employees and their participating dependents are enrolled in individual health coverage.
This requirement must be met at the start of each plan year, each time a reimbursement request is submitted, and on an individual basis when a newly hired employee becomes eligible.
According to ICHRA regulations, individual coverage can be substantiated through one of two ways at the discretion of the plan administrator, or employer.
Employees can directly provide their employer with proof of coverage from an insurance card, explanation of benefits (EOB), or other document stating the employee (and any dependents) will have individual health coverage for the plan year or relevant month. This proof of coverage should come from a third party, like an exchange or the insurance provider.
Employees can provide a written or electronic attestation of coverage to the employer. This attestation states that the employee and their dependents will be enrolled in individual health coverage for the plan year (or relevant month). The attestation must include the date the insurance coverage begins as well as the name of the coverage provider.
The final rules regarding the ICHRA state that employers or plan administrators can assume the attestation or documentation provided by the employee is valid for substantiation of individual coverage as long as the plan administrator or employer have no knowledge that it is misleading or inaccurate. Because of this, employers are not burdened with having to directly verify individual coverage for their participating employees.
While the ICHRA is an amazing benefit that can help a business stay on budget, it’s important for businesses offering the plan to maintain compliance. This will ensure the business and it’s employees can enjoy the perks of the benefit without being concerned by penalties or fines.
You can learn more about correctly offering an ICHRA by checking out our other resources on the topic.