How ICHRA Works
Think of it like a 401(k) plan for health insurance
ICHRA ("ik-rah") is shorthand for "Individual Coverage Health Reimbursement Arrangement." ICHRAs allow employers to reimburse employees a fixed amount of money each month for health insurance premium and health care related out-of-pocket expenses if they purchase their own health insurance plan. They are an alternative way of providing quality health insurance benefits to employees with the same tax benefits of a traditional group plan.
Who is ICHRA for?
Employers of any size may offer an ICHRA to any type of worker including full time and part time employees as well as independent contractors.
ICHRA Resources
Download our free Employer's Guide to ICHRA
FAQ
Employers of any size may offer an ICHRA to any type of worker including full time and part time employees as well as independent contractors.
Employers don’t select the insurance company or the plan(s) when using an ICHRA for health insurance benefits. They simply determine how much they want to contribute towards the benefit and employees select their own insurance company and plan. Plan rates are community rated and not subject to underwriting, claims experience, or health conditions. If an employee applies for a plan, the insurance company is obligated to sell them the plan at the published rate.
ICHRA plans are considered ACA compliant as all qualified plans provide minimum essential coverage and employer contributions can be structured to be affordable. COBRA also applies for employers subject to ERISA law. However, state continuation does not apply.
ICHRA's are compatible with both health care flexible spending accounts and health saving accounts. Employers can offer one or both in conjunction with an ICHRA.
Employers may pay insurance companies on behalf of each employee and payroll deduct the employee contribution if their premium exceeds the employer contribution. This method has the advantage of a familiar “group plan” feel to employees. Alternatively, employers may require employees to pay the entire premium and submit a reimbursement request for the employer contribution. This method creates cash flow and inconvenience issues for some employees.
The 2022 plan year saw another increase of new insurance companies entering the market and existing insurance companies entering more states.
Individual health insurance rates are at parity or lower than small group rates in 19+ states and this trend continues to grow.