With the recent release of ICHRA (individual coverage health reimbursement arrangement) regulations, you may still be weighing your options to determine the best health insurance solution for your business (or your client). With no contribution maximums and no company size restrictions, an ICHRA is an enticing alternative for many employers who have always offered a traditional group health plan, especially those who may be interested in a more fixed cost model of health insurance vs. managing employees’ healthcare spend to keep costs down.
If you’re just joining the conversation, ICHRA is the latest and greatest health reimbursement arrangement- regulations were just released in June. Our team at Take Command Health has been focused on supporting our clients with an administration platform for ICHRA’s predecessor, QSEHRA, which allowed businesses with less than 50 employees who did NOT offer a group health plan to reimburse their employees for premiums and eligible medical expenses tax free.
The ICHRA rules are less restrictive; it is available to companies of all sizes; employees just need to have individual health insurance coverage to qualify. So instead of offering a group plan as an attempt at a one size fits all solution, employers can allow employees to choose a plan that best meets their families’ needs and then can reimburse them up to a certain monthly allowance for those premiums & medical expenses, tax free. It’s a win-win - employees manage their own health spend & choose which plan to purchase, and employers can fix their costs by offering a set reimbursement amount per month.
ICHRA allows employers to “get out” of the insurance risk game. At the end of the year, unclaimed allowances stay with the employer. As compared to QSEHRA, ICHRA provides much more flexibility and opportunity for customization-companies can offer different reimbursement amounts to different groups of employees. You can read our full blog post here to learn about the 11 different employee classes.
We’ve been in the weeds analyzing the new regulations, so here’s a quick pro/con list to hopefully help you come to a decision whether this is the right solution for you:
The pros of the individual coverage HRA
Simplicity/Focus: The simplicity of ICHRA will allow you to spend your time where it should be- focused on running your business. Since you are offering a fixed amount per month, there’s no need to spend time & mental energy trying to implement wellness programs & manage your employees’ healthcare spend to control your costs on a traditional group health plan.
Greater tax efficiency: ICHRA allows tax-free reimbursements for premiums and qualified medical expenses (if allowed by the ICHRA plan design).
Personalized plan choice: Employees can shop the plan on the individual market that best meets their needs. If one employee prefers their Aetna plan, no problem. If another would like a BlueCross plan because the network includes his preferred doctors, that’s great too!
Special enrollment trigger: This is a big one! With QSEHRA (ICHRA’s predecessor for companies with 50 or fewer employees), an employer could enroll and start reimbursing employees mid-year, but if employees did not already have a compliant plan, they had to wait until open enrollment (generally November 1-December 15). With ICHRA, when a company enrolls, employees are eligible for special enrollment, which means they can shop a major medical plan on the individual market at that time (and outside of the typical open enrollment timeframe).
Flexibility: You can offer different monthly allowance amounts to different groups of employees. To help you prioritize your health benefits budget, these 11 employee classes separate employees into groups by legitimate job-based criteria like hours worked or geographic location.
Premium tax credit opt out: If the ICHRA is considered “unaffordable,” employees have the option to opt out of receiving ICHRA reimbursements and choose to keep their tax credit instead.
No contribution maximums: You can choose to offer as much or as little as you’d like to employees in the form of monthly allowances.
No employee size restrictions: Worth mentioning again-unlike QSEHRA, there are no company size restrictions, meaning businesses of all sizes can participate.
The cons of ICHRA
Obviously, we see great potential for ICHRA, but there are a few negatives to consider:
Spouse group plans excluded: Employees participating on a spouse's group plan (from another employer) cannot participate in ICHRA. To participate in ICHRA, employees will have to purchase individual health insurance or be enrolled in Medicare Part A+B or Part C.
Sharing plans excluded: The regulations were pretty clear on this one- sharing plans like Medi-Share, Samaritan Ministries, and Liberty Health Share are excluded from being reimbursed through ICHRA.
Lack of integration with TRICARE: Individual coverage HRAs may not be integrated with TRICARE. TRICARE individuals need to purchase a separate ICHRA compliant plan from the individual marketplace to participate in ICHRA.
If ICHRA is affordable, no premium tax credits: If your ICHRA is considered “affordable,” employees don’t have the option to choose whether to receive ICHRA reimbursements or opt out and take advantage of their tax credit. They will not be eligible to receive tax credits if offered an affordable ICHRA.
About Take Command Health
Take Command Health is a recognized leader in QSEHRA administration and small business HRA tax strategy. We were at the forefront of the new ICHRA administration regulations and responded with our own comprehensive and exclusive research to the proposed regulations. In addition, we were the only HRA provider invited to Washington when the new regulations were passed. Our team is passionate about HRAs and the impact they can have on small business.
Is your company or client going to be a part of this exciting change? 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.