There's been a lot of hype around the ICHRA since it was announced in 2019 to be made available at the start of 2020. Since you're here, you're probably wondering where to start if you wanted to offer an ICHRA.
As with any health benefit, launching an ICHRA requires some planning. This step-by-step guide is your map to help you navigate this new territory.
It’s the result of a whole year of speaking with customers about their experiences with ICHRA and learning what they wish they had known when they started.
Step 1: Define your goals
Take the time to understand your motivations for offering an ICHRA so you can measure success. Whatever your goals may be, knowing your priorities will help you design the benefit to meet those needs. Here are some common goals employers are seeking to achieve with an ICHRA:
- Take care of your employees.
- Increase offer-to-hire and employee retention rates by offering a quality health benefit.
- Control costs with a health benefit you design.
- Keep things simple with a health benefit you can manage in minutes per month.
- Comply with regulations regarding health benefits for applicable large employers, or ALEs.
Step 2: Design your ICHRA benefit
The ICHRA is one of the most flexible health benefit solutions on the market. Here are some elements you can customize to make it a perfect fit:
- Classes. The ICHRA allows employers to use predefined employee classes like salaried, hourly, full-time, part-time, and geographic location to determine benefit eligibility and allowance amounts.
- Allowances. Instead of paying a percentage of premiums as you do with a group health insurance plan, the ICHRA lets you specify dollar amounts that your employees can use for eligible expenses. These amounts can be customized for each employee class or standardized to keep things simple.
- Eligible expenses. Decide whether to reimburse employees only for health insurance premiums or for out-of-pocket expenses too.
Step 3: Prepare and generate required legal documents
The ICHRA is a group health plan, which means it's subject to rules and regulations from the IRS, Department of Labor, ERISA, the ACA, and HIPAA. The first step in ensuring that you offer a compliant ICHRA is to prepare and generate the required paperwork: a plan document that covers all of the nitty-gritty legal details and an employee-facing Summary Plan Description, or SPD, that summarizes the plan document and makes it easy for your employees to understand.
Common ways you can do this include ICHRA administration software, hiring a lawyer, or purchasing online templates. The one you choose will depend on your budget, timeline, and required level of customization.
Step 4: Decide how to administer your ICHRA
You have options when it comes to ICHRA administration. Each method varies in cost and the amount of work you’ll handle in-house vs. outsource. Choose the one that works for you:
- Full self-administration: all responsibilities lie with your organization.
- Partial self-administration via ICHRA administration software: outsource most responsibilities like legal document generation, documentation review, and employee communication to a partner and retain responsibility for approving verified expenses and adding reimbursements to payroll.
- Fully outsourced: Your organization will outsource all responsibilities to a partner like a third party administrator, or TPA, but sacrifice control over your benefit and plan design flexibility. Poor customer service and long wait times are common among fully outsourced solutions since these companies tend to have many other clients they’re working with, providing services ranging from payroll and timekeeping to employee training.
Step 5: Communicate the benefit to employees
This step is perhaps the most critical part of the entire process. To be successful, you have to demonstrate the value of the ICHRA and communicate why you chose it. Your employees should understand the advantages of the ICHRA over your previous health benefit, or lack thereof. Here are some suggestions on how to do just that:
- Hold an all-hands employee meeting to let them know you are offering an ICHRA and explain how it works. You should:
- Communicate deadlines for both ICHRA and the enrollment period for your employees to purchase their individual health insurance plan. Note that offering an ICHRA for the first time will make your employees eligible for a special enrollment period (SEP).
- Provide education and resources about affordability and premium tax credits so they can make an informed decision about whether or not they should opt in to participate based on their specific situation.
- Inform them which types of insurance policies they will need to purchase to be eligible to participate.
- Explain where and how to shop for individual health insurance so they don’t have to go it alone.
- Help them understand the reimbursement process, how to submit expenses for reimbursement, and who to go to if they need help.
- Send employees a formal notification to comply with regulatory requirements.
- Follow up with your employees before the deadlines. You can see if they’ve made their decision to opt in or out; verify that they understand how the benefit works and its impact on their premium tax credits, if applicable; and benchmark their sentiment about the ICHRA to see how it changes over time.
You just successfully launched your ICHRA! Now what?
Once your ICHRA has launched, you’ll need to continue to follow up with your employees. Ask if they have questions about how to submit expenses and how they receive reimbursements, or which expenses are eligible for reimbursement. If you are using administration software, check to ensure they have signed up, logged in, and know how to use it.
This step may vary in length depending on your health benefits situation prior to offering an ICHRA. For companies transitioning from not offering any health benefit or giving employees a taxable stipend for healthcare expenses, we’ve found that employees get the hang of their new benefit pretty quickly.
For those switching from a group health insurance plan, it can take a bit longer. Plan on a 60-90 day learning curve as employees adjust to the reimbursement model. If you use PeopleKeep, our customer service team is available to answer any questions and offer all the help your employees need.
Thinking of offering an ICHRA but still have questions? Leave a comment below or email us at firstname.lastname@example.org.