ICHRA: Read all about it
An individual coverage HRA, also known as an ICHRA, is a type of health reimbursement arrangement. HRA insurance, by definition, is not actually an insurance plan itself, but it is a form of health benefit. A Health Reimbursement Arrangement (HRA) is a kind of health benefits solution that enables employers to reimburse the employees at their companies for certain, qualified healthcare costs and individual insurance premiums.
ICHRA plans may not be the typical method of providing employees with health benefits, but ICHRAs have some significant advantages over traditional group health plans, which can be needlessly complicated and very expensive. Health Reimbursement Arrangements, including ICHRAs, can eliminate the need to find a single group plan that fits the needs of all your employees at once, among other advantages.
What is an ICHRA Plan?
Many employers provide their employees with health benefits in the form of a group health plan. An ICHRA, or Individual Health Reimbursement Arrangement, is a different method of offering health benefits to employees. According to Healthcare.gov's ICHRA definition, employers that opt for an ICHRA can offer “defined non-taxed reimbursements to employees for qualified medical expenses” of various kinds. Qualified medical expenses could include out-of-pocket expenses such as deductibles and copayments. In order to be reimbursed by their employer for medical expenses, employees need to have individual health insurance coverage. ICHRAs can benefit all but the very largest of companies and their employees in practically any industry.
There are a few different kinds of Health Reimbursement Arrangements, including:
- Individual Coverage HRAs (ICHRAs)
- Qualified Small Employer HRAs (QSEHRAs)
- One-Person 105 HRAs
- Excepted Benefit HRAs (EBHRAs)
- Traditional HRAs
- Standalone HRAs (ICHRAs and QSEHRAs are both types of standalone HRAs, but there are other kinds as well, such as Medicare HRAs, Retiree HRAs, and Spousal HRAs.)
How do ICHRAs work?
ICHRA health insurance can be a great alternative to traditional group health insurance for many employers and employees. But now that we've covered some of the benefits of an ICHRA plan, the question is: how does ICHRA work? ICHRA health insurance is actually very simple. Let’s break it down into a few basic steps.
- The employer designs their ICHRA plan. This step includes clearly outlining which employees are eligible for the plan setting limits on reimbursement, if there are any (ICHRAs do not have reimbursement limits, but other kinds of HRAs can have limits).
- Next, it’s up to employees to select and purchase the individual health insurance plans they desire.
- After employees purchase their plans of choice, they can then submit eligible reimbursement claims to the employer.
- Finally, the employer reimburses employees for all valid reimbursement claims.
This is a general set of steps that outlines the basic process of an ICHRA plan. On a more detailed level, employers design reimbursement structures that have different rates for different ICHRA classes, ages, family sizes, etc. They also set aside a monthly healthcare reimbursement budget. Then, they notify employees of the ICHRA plan and ensure employees understand what it means for them. It’s then up to employees to choose the individual health insurance coverage that works best for them. Our enrollment experts at Take Command can help employees navigate the process of choosing coverage.
