Individual Coverage HRAs (ICHRA), which can be offered by employers beginning in 2020, will allow employers to reimburse their employees tax-free for medical expenses as well as individual healthcare premiums. Employers will be given significantly more design control and flexibility over their budget and plan selection than ICHRA's predecessor, QSEHRA.
While the final rules for this new type of tax-friendly HRA are still being worked out, we are sharing what we know so far and keeping all of our content updated as new information comes in. ICHRA will be changing the landscape of group health plans and we are so excited to see the results of that.
Who will be covered?
For starters, it will help you to know which employees will qualify. Some of the proposed employee classes include:
- Full-time employees
- Part-time employees
- Seasonal employees
- Employees under the age of 25
- Employees who have not satisfied a waiting period for coverage
- Employees whose primary site of employment is in the same rating area
An additional perk of ICHRA is that employers will be able to offer different reimbursement amounts or coverage to the different classes. As an example, employers could offer full-time employees a group plan, but offer part-time employees an ICHRA. Depending on how your company is set up, this could be a big benefit over QSEHRA!
Can ICHRA reimburse tax-free for an employee on a spouse’s plan?
Short answer: yes.
Long answer: Unlike a QSEHRA, employees will have the choice to opt out of the ICHRA plan, depending on how "affordable" the plan is deemed). If they do choose to participate, they will select and enroll for a health plan on their own. The good news here is that they don’t have to be the primary on the coverage to qualify for your company's ICHRA plan.
Employees using ICHRA will be reimbursed tax-free for medical expenses that are incurred even if they are on their spouse’s insurance plan. As a side note, a dependent on a parent’s plan is eligible as well.
In these situations, the employee may still be responsible for a portion of the premium that is paid. If this is the case, when the employer sets the terms and limitations of the plan, they will decide at that time if they will allow employees to make claims for these premiums.
Make sure and check back with us soon! We’ll be updating our blog with the latest information as it’s announced. The finalized rules for ICHRA are still up in the air and the plan won't be offered until 2020, but we think it’s important to have things in order for your health plan needs ahead of time! Send us an email or give us a shout if you have any questions!