PSA: This is not an in-depth overview of the ICHRA. If that’s what you’re after, our comprehensive ICHRA guide is your best friend. Consider this the SparkNotes version.
Who it’s for
ICHRA stands for individual coverage health reimbursement arrangement. Employers of all sizes can offer an ICHRA, but employees must have individual coverage that meets minimum essential coverage (MEC) requirements to participate. You can offer an ICHRA on its own or alongside a group health insurance policy. If you offer group insurance and an ICHRA, employees cannot be given the choice between the two.
What it does
An ICHRA allows employers to reimburse employees tax-free for health care expenses like insurance premiums, copays, and prescription drugs. Check out our eligible expense tool to see what’s covered.
How it works
An ICHRA looks and feels like a group health insurance plan with one major difference: instead of the employer choosing one plan for all of their employees, employees get to shop for their own individual health insurance plans and choose the one that best fits their needs. Employers also get complete control over their health benefit costs by setting up employee classes to determine benefit eligibility and allowance amounts from which reimbursements will be made.
Once you’ve designed your ICHRA and employees have gotten coverage, you can start reimbursing them for their expenses. Employees submit documentation that includes the dollar amount, date of service or purchase, and a description of the service or product. It’s important to note that some expenses also require a doctor’s note or prescription to be reimbursed. If the documentation is in order and the expense is eligible, all that’s left to do is pay the employee. Most reimbursements are added to payroll as a non-taxable line item, but you can cut a separate check if you like.
When it can be offered
You can start offering an ICHRA at any time throughout the year. Once you’ve notified your employees, they qualify for a special enrollment period (SEP) and have 60 days to get insured, even if it’s not during the annual open enrollment period.
Where it’s available
There are no restrictions on employer location, but only employees in the US are eligible to participate in an ICHRA.
Why you should consider it
If you prioritize giving your employees the freedom to choose their own plans while controlling your health benefits budget, an ICHRA is a great solution. It can also work well for US-based or international employers with distributed workforces that can’t participate in the main group health plan due to their location.
Watch our demo to learn more about PeopleKeep’s ICHRA software and how we make health benefits hassle-free for more than 3,000 employers.