5 Things to Know About the New ICHRA

The new Individual Coverage Health Reimbursement Arrangement (ICHRA) will become an option for employers to offer employees effective January 1, 2020.

Here are 5 key things to know about the ICHRA:

  1. The  ICHRA  lets  employers  reimburse  employees  for  individual  health  insurance  premiums,  Medicare insurance premiums and out-of-pocket medical expenses. Reimbursements are tax-free, and the employer determines the maximum reimbursement limits. 
  2. Employees  must  have  individual  coverage  to  be  eligible  for  reimbursement  under  the  ICHRA.  Individual coverage  includes  grandfathered  plans,  grandmothered  plans,  ACA  regulated  plans  (on-  or  off-Exchange), insured  student  health  plans,  Medicare  or Medicare  Advantage  plans.  Coverage  through  a  short-term medical plan, a spouse’s group health plan or a healthcare sharing ministry will not qualify.
  3. Employers cannot offer the same class of employees a choice between a group health or the ICHRA. They can,  however,  offer  one  class  a  group  health  plan  and  a  separate  class  an  ICHRA.  Permissible  classes  of employees  include  full-time,  part-time,  salaried,  non-salaried,  seasonal,  union, temporary, employees  in a waiting  period,  employees  working  in  different  geographic  locations,  non-resident  aliens  with  no  U.S. income or the combination of two or more of these classes. 
  4. Employers  must  offer  the  ICHRA  under  the  same  terms  to  the  same  class  of  employees.  Reimbursement limits may only vary based on age and/or family size. Age-based variations cannot exceed a 3:1 ratio. 
  5. A special enrollment period  (SEP) will be created upon the establishment date of the ICHRA. The SEP is a 60-day period before or after the plan establishment date.

The ICHRA may be a valuable option for the following employers:

  • Employers who do not currently offer a group health plan due to cost or participation requirements
  • Employers who want to extend a benefit to a specific class of employees, such as part-time employees
  • Employers who receive a large premium increase at renewal
  • Employers who are only offering coverage because of the Employer Mandate

Another  thing  to  point  out  is  that  other  types  of  group  health  plans  can  be  offered  alongside  the  ICHRA.  For example,  the  employer  can  use  the  ICHRA  as  their  medical  benefit  offering  while  making  group  dental,  vision  or Flexible Spending Account (FSA) coverage also available. Many employers may turn to this option as a simpler way of providing benefits to employees.

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