What Is ICHRA?
ICHRA stands for Individual Coverage Health Reimbursement Arrangement. It’s an employer-sponsored health plan that allows employers to reimburse employees for certain health care expenses. Unlike other employer-sponsored one-size-fits-all health plans, ICHRA allows employers to customize the plan to fit their specific needs.
This includes offering different reimbursement levels, setting different eligibility criteria, and choosing which medical expenses to cover. The flexibility and cost savings that ICHRA offers make it an attractive option for employers looking for a more customized health plan.
For more all about ICHRA, check out our guide: all about Individual Coverage HRAs.
What Types of Businesses Use ICHRA?
ICHRAs work well for businesses of all sizes and primarily for those with a mixed workforce like full-time, part-time, seasonal, and remote workers. Industries that could be a good fit for ICHRA plans include restaurants, hospitality, retail, professional services, healthcare, landscaping, construction, and manufacturing.
ICHRA for Small Business
ICHRA is an ideal health plan option for small businesses. The plan offers flexibility, allowing businesses to customize the plan to fit their needs. This includes choosing which medical expenses to cover, setting different eligibility criteria, and offering different reimbursement levels.
This plan is beneficial for small businesses because it can help them save money on health insurance costs and attract and retain employees, competing with larger companies for talent. In addition, ICHRA is compliant with the Affordable Care Act (ACA), so small businesses can avoid any penalties for non-compliance. ICHRA is an attractive option for small businesses seeking a more customized health plan.
ICHRA for Large Businesses (ALEs)
ICHRA is a great choice for large companies (Applicable large employers) with more than 50 full time equivalent employees. Instead of taking on the risk and financial burden of a traditional group plan, ICHRA allows companies to control their health spend more efficiently and not be helpless with annual renewals or out of control self-funded plans.
How to set up an ICHRA Plan for employees
Now you’re ready to design and launch your ICHRA! Setting up an ICHRA is easy when you work with an ICHRA administration partner to walk you through these six basic steps:
Step 1: Pick a start date
If you’re used to open enrollment, picking a start date for your ICHRA will be a change, the good kind! With ICHRA, you can start any time of year, and the start date will trigger a special enrollment period so your employees can easily find plans on the individual market outside of the open enrollment dates.
Step 2: Design ICHRA classes for eligible employees
ICHRA provides business owners with powerful health coverage customization. Employers can divide employees into custom classes to determine what kind of benefit they receive (ICHRA to all employees, ICHRA to certain classes, no benefit to certain classes, or a traditional group benefit to certain classes). These classes include full-time, part-time, seasonal, salaried, non-salaried, employees working abroad, employees in a waiting period, employees working under a collective bargaining agreement, temporary employees in a staffing firm, employees in a specific geographic location, or a combination of any of those.
Step 3: Determine a budget and set allowances
The next step is to determine your limits for employee reimbursements for premium costs and medical expenses. You can set a different monthly allowance for varying classes that you choose to include and can even integrate this option with a traditional group plan. From there, you can further increase allowances based on age or the number of dependents. We weren’t kidding about the flexibility of ICHRA!
Step 4: Establish legal plan documents
The IRS and Department of Labor have a variety of rules to follow regarding HRAs. Your legal plan documents, which will include a formal plan document and the summary plan document, must include the ICHRA policies, including monthly reimbursement amounts, class structure, claims processes, reimbursement eligibility, and information on HIPAA and other procedures involving privacy. Failure to comply with the rules will result in penalties.
Step 5: Communicate your new benefit to employees
Tell your team about your new health benefit plan. You’ll want to include information like the start date, annual HRA allowance, and how to obtain coverage, including information regarding a special enrollment period and how premium tax credits interact with ICHRA. The Take Command team will help onboard your employees as part of our service.
Step 6: Provide resources for employees to purchase individual health insurance
Take Command is the only HRA administrator offering insurance plan shopping support on the individual market. This means we can provide your employees the best on- and off-market options based on their needs, budget, preferred doctors, and prescriptions.