If you are considering opting for an individual coverage health reimbursement arrangement (ICHRA) to give your business and your employees better healthcare options, and you're wondering if you meet the requirements for this great new benefit, you've come to the right place. Here are the ICHRA requirements to remember. Luckily, there's not too many.
If you are weighing the pros and cons of the individual coverage HRA, you are not alone. This trend is gaining traction across the country. In fact, the White House estimates that 800,000 businesses and upwards of 11 million workers will benefit from this new model of health insurance.
Company size requirements for the individual coverage HRA
Good news, everyone! The individual coverage HRA is a scalable benefit, available for businesses of all sizes (unlike its predecessor, the QSEHRA, which is only for companies of less than 50).
This means that a five-person startup, a mid-sized 50-person team, or a 500-person corporation can all sign up for an individual coverage health reimbursement arrangement.
Individual coverage HRA requirements for contribution amounts
More good news. There is no limit on what you can contribute to an ICHRA in 2020. The sky’s the limit for this tax-friendly alternative to traditional group plans.
Individual coverage HRA class requirements
ICHRA classes, one of our favorite things about this new type of HRA, allows employers to scale benefits across different types of employees. That means everyone doesn’t have to be treated fairly across the board and you can concentrate your benefits dollars on the employees who matter most. Within each class (like part time, salary, remote, etc), employees have to be treated equally.
Individual Coverage HRA Employee Requirements
Any member of the team is eligible to participate in ICHRA, but for employees to participate in ICHRA and receive reimbursements, two boxes must be checked when it comes to whether or not their health plan will integrate with ICHRA. First, they must be covered by a qualified individual health plan, meaning that the plan has no annual or lifetime limits (PHS 2711) and covers preventive health services with no cost sharing (PHS 2713).
Plans that jive with the individual coverage requirements include individual major medical plans found on or off the exchange, catastrophic plans (limited to those under 30 or those who qualify for a hardship exemption), Medicare parts A or B+C, and student health insurance.
While employees will have many options on the individual market, the rules do not apply for employees seeking coverage on a spouse’s employer-based plan. We think this is a bummer, but it’s an important individual coverage requirement to know.
In addition, we know there are a lot of alternative plans on the market now based on short-term plans, fixed indemnity plans, and sharing ministries. Although these alternative plans may provide great coverage, they will not work with ICHRA.
If an employee doesn’t have a plan, no worries! Being eligible for ICHRA means that you have a special enrollment period to find a plan that works for you.
ICHRA administration requirements
Setting up an ICHRA is not rocket science, but ICHRA administration does require some important components:
- Legal Plan Documents (subject to ERISA)
- COBRA Administration (if not exempt)
- Process to substantiate employee claims
- Reimbursement mechanism
- Record-keeping and Tax Reporting
If this seems overwhelming to you, remember that if you have an ICHRA Administration software like Take Command Health, we'll do all the heavy lifting for you.
Is an individual coverage HRA the best choice for me (or my client)?
Does your business meet the requirements? We certainly hope so! To help you learn more about this HRA option, we've put together some resources to help you choose. Check out our post on ICHRA vs. QSEHRA, which compares two of our favorite HRAs side by side, or a post about ICHRA vs. group plans and the pros and cons of each, or our every-popular ICHRA FAQ blog, or our extremely comprehensive and never boring ICHRA Guide.
Our team is on hand to chat with you on our website if you have any questions.
We always recommend businesses speak with their CPA to confirm that an HRA is the best route for your business (or your client's).