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. If an employee is on a spouse's plan, however, the difference between reimbursement through QSEHRA and ICHRA is worth noting.
What type of plans can be integrated with the Individual Coverage HRA?
ICHRA is only an option for employees (and their dependents) who are actually enrolled in individual market coverage. That means plans from the individual market, student health insurance, and Medicare Parts A and B or C.
The final rules are pretty clear on what is not considered an ICHRA-compliant plan.
Individual coverage integration unfortunately does not include coverage on a spouse's plan, short-term plans, sharing ministries like Medi-Share, or TRICARE.
What we hope is that the Departments will take another look at this aspect of the final rules. There are a few hurdles to get through to make reimbursement for spouse's plans feasible, but we think it would be a great benefit.
How to choose between ICHRA and a spouse's plan
Since ICHRA can't be used to reimburse on a spouse's plan, it means that a couple needs to analyze their choices to see what works best for them from a financial standpoint. Think of it this way: if two people that were married were both offered individual plans through their employer, they would choose to forego the benefit from one based on which one offered better coverage or a better price, depending on their criteria.
The same holds true for choosing between an ICHRA or coverage on a spouse's plan. Which scenario benefits the couple most? It depends on the amount of reimbursement through the employer's ICHRA offering paired with an ICHRA-compliant plan or the caliber and coverage of the health plan from the other spouse's employer.
But remember: if two spouses are offered an ICHRA, they can purchase one plan and qualify for ICHRA but cannot double-dip reimbursements. Very important!
Another important distinction is that If the spouse has purchased a plan through the individual marketplace, the employee can participate in ICHRA and submit the family premium rate for reimbursement. It just doesn't work if it's a group plan.
Still need help?
Chat with our team with any questions you may have about these new, tax-friendly benefits or check out our new ICHRA Guide for more information on its background, setup process, requirements, and rules.