Employers across the nation have faced several challenges brought on by the COVID-19 pandemic, forcing new ways to run their business. But these challenges have also created a unique opportunity for employers to get creative with their employee benefits offerings.
How can employees have the Health Insurance coverage they want and/or need without breaking the business’s bank account? Traditional group plan costs continue to rise, making it more difficult for employers to offer these types of plans. So what can employers do? One employee benefit option that is becoming increasingly popular is the Individual Coverage Health Reimbursement Arrangement (ICHRA).
ICHRA is an employer-funded, tax-advantaged health benefit that is used to reimburse employees for individual health insurance premiums, and healthcare expenses.
ICHRA was finalized as a new regulation from the Departments of Treasury, Labor and Health and Human Services in June 2019, and has become available since January 1, 2020.
The main functions of the ICHRA are:
-Businesses of all sizes can reimburse medical expenses (tax free) to employees who have individual health coverage.
-It allows these businesses to make distinctions in eligibility and contribution amounts among employees based on certain criteria, such as classes.
The Classes
Businesses can structure employee eligibility based on the following defined classes:
- Full-time employees
- Part-time employees
- Salaried employees
- Hourly employees
- Seasonal employees
- Temporary employees who work for a staffing firm
- Employees covered under a collective bargaining agreement
- Employees in a waiting period
- Foreign employee who work abroad
- Employees in different locations, based on rating areas
- A combination of two or more of the above classes
Eligibility
To participate in the ICHRA, employees must purchase individual health insurance or be covered by Medicare Parts A and B or Medicare Part C, and meet the eligibility requirements.
Employer Contribution
The business can choose its monthly contribution to make available to employees. There is no minimum or maximum contribution limits and different levels of contribution can be offered to different employees based on:
-Their class (see above list)
-Their age
-Their family size
Administration
Employees submit their incurred eligible expense information along with proof of individual health coverage to their employer, and the employee is reimbursed according to their level of contribution, tax-free. Flyte HCM makes this process hassle-free for employers with ICHRA Administration.
So is the ICHRA benefit right for your business in these times of change? Reflect on the following aspects of the ICHRA. As with everything, there are both pros and cons. Here are a few of them:
Pros
- Any sized business can offer ICHRA as a benefit to their employees
- There are no minimum or maximum employer contribution limits
- Offering the ICHRA satisfies the ACA’s Employer Mandate, as long as the affordability requirements are met
- Businesses have more control over their benefits budget
- Employees find the health coverage that best fits their individual needs
- The ICHRA is simple to administer when you work with a benefits administrator*
*Flyte is fully equipped and ready to administer your ICHRA plan for 2020 and beyond
Cons
- Participants in the ICHRA are not eligible for premium tax credits
- Educating your employees how the ICHRA works will be crucial
- The ICHRA does not work with health care sharing ministry plans or for employees covered by a spouse’s group plan
This article is not a complete list of all the aspects of the ICHRA. Check out our informative ICHRA page and download our Flyte ICHRA Complete Guide. Our FAQ page answers the most frequently asked questions on Individual Coverage Health Reimbursement Arrangements found at ICHRA.com or reach out directly to Contact Flyte.
Our HR & Benefit Pros are ready to help
Need assistance or have any questions about this communication? Our team of HR & Benefit Professionals are ready to help you. Give us a call today or email Support@FlyteHCM.com
