ICHRA gives employers an incredible ability to design a plan that’s tailor-made for their company—and it’s been such a game-changer because so many businesses can take advantage of its benefits. Let's review who is (and is not) eligible for ICHRA.
Wondering how to know if your business can offer an ICHRA? The IRS has made it fairly easy — employers are eligible if they have at least one W2 employee. That includes businesses, governmental bodies and religious organizations. This means businesses of any size can participate; there's no maximum limit for size or reimbursement rate.
What is an ICHRA?
Let’s recap. Before the Affordable Care Act small employers often used HRAs to reimburse for individual health insurance, but new ACA regulations at first made it hard to get appropriate tax deductions.
QSEHRA plans and its cousin, ICHRA, now make it easy for employers to manage plans, customize benefits and control costs — whether a large or small employer.
So, an ICHRA could be perfect for an employer who does not want to try to manage employee healthcare spending and the risks present in that spending, but does want to make sure his or her employees are taken care of.
ICHRA plans can also be designed to meet the requirements for large employers with more than 50 employees who are required to organize health care under the ACA.
What do I have to do to be ICHRA eligible?
The most important thing for employees to do to use a company ICHRA plan is to sign up for a qualified health plan, which basically means it provides coverage of essential benefits such as preventative and wellness services and emergency services, as well as limits on cost-sharing.
Employees can purchase individual coverage plans on or off the Affordable Care Act exchange.
The following plans can be integrated with ICHRA.
- Major medical plans purchased on the exchange (Bronze, Silver, and Gold)
- Medicare (Part A+B, or Part C)
- Catastrophic Plans (limited to those under age 30 or must qualify for hardship exemption)
- Student Health Insurance
It may sound complicated, but once you know the guidelines it’s fairly intuitive; our post on employee requirements for ICHRA eligibility dives into the details for workers.
ICHRA employee classes
Your company might separate out different types of employees and plans offered — a company may choose to offer full-time employees an allowance of $1000 per month and part-time employees an allowance of $500 per month — but employers need to make sure that plans are offered fairly across a group, known as a class.
Eligibility requirements can be structured along nine employee classes, including:
- Full-time employees
- Part-time employees
- Seasonal employees
- Employees in a waiting period
- Employees covered by a collective bargaining agreement
- Employees under age 25
- Employees who work in different locations, based on rating areas
- Foreign employees who work abroad
- A combination of two or more of the above
Which employees are not eligible for ICHRA?
Workers who are owners or part-owners are not eligible. Employees covered by a spouse’s group health insurance cannot participate. Employees belonging to a health care sharing ministry still would not be meaningfully eligible despite a proposed IRS rule, because members of sharing ministries also must have a marketplace plan.
Pro-tip: Employees currently without health insurance will qualify for a special enrollment period when they become eligible for an ICHRA, which gives them 60 days to shop for individual health insurance coverage on a marketplace plan. If they fail to do that, they won’t be eligible for the ICHRA until the next enrollment period.
Does ICHRA owner eligibility matter if I'm part of a corporation, nonprofit, S-corp or am a sole proprietor?
Corporations (and, for the sake of this post, B-corps, LLCs taxed as C-corps and nonprofits) are the easiest entity type to handle when it comes to health insurance because owners are considered employees and can benefit from the company’s ICHRA. Dependents and any W2 employees can benefit as well.
According to the IRS, S Corporation owners and their spouses who own more than 2% of a business cannot participate in an ICHRA. The rule only applies to owners, though; employees can participate.
Sole proprietorships, since they are owned and operated by one individual who is not an employee, cannot create an ICHRA.
Size of company and ICHRA eligibility
Employers of any size — again, your company just have to have one or more W-2 employee — can offer an ICHRA, though there are some thresholds companies of different sizes must meet in order to comply with the Affordable Care Act.
There are some rules that large employers with more than 50 employees must keep in mind in order to keep plans “affordable,” per the ACA requirements.
The affordability equation isn’t necessarily easy to know, but our ICHRA guide goes in depth there if you have any questions, and we even have a handy affordability calculator so you can check out different options. The IRS also offers several safe harbors that employers can use to estimate these amounts to make an affordability determination.
If you’re an employee looking for a qualified ICHRA plan, you can shop and compare plns directly at Take Command Health. Employers interested in structuring coverage or comparing options can talk with an expert and get started with a custom design in minutes.