ICHRA

What is ICHRA?

Individual Coverage Health Reimbursement Arrangement

A shift from “defined benefit” to “defined contribution.”

First available January 1, 2020, ICHRA is a rapidly growing alternative to conventional group health insurance. ICHRA is a medical reimbursement plan that allows employers of all sizes to provide defined, non-taxed financial contributions to employees for qualified medical expenses, including monthly premiums. Conventional group health insurance consists of a defined benefit. Employers are tasked with understanding each employee’s individual medical requirements and meeting this wide array of needs with a small selection of plans from a few carriers. ICHRA, on the other hand, consists of a defined contribution. Employers provide a non-taxed allowance of funds to their employees and empower them to select their own plan, with all their personal and family needs taken into consideration. Experts predict ICHRA will become the most common form of employee benefits in the United States over time.

The US Department of Health and Human Services estimates that 800,000 employers will offer an ICHRA to more than 11 million employees and family members by 2025.

Attributes

Employer contribution can be used for individual medical, Medicare (A, B, C & D) and ancillary insurance.

No limit on the amount an employer can contribute.

Works for any size employer

For large groups (50+ employees) ICHRAs meet ACA mandates.

Small groups (less than 50 employees) can leverage ACA subsidies.

Employers can replace group health plans for the entire company, or just a class of employees.

Employers can grandfather employees into the group health plan and offer new hires only an ICHRA plan.

Employer Advantages

1. More plan selections.

2. Direct control over their health – employees can act in the best interest of themselves and their family.

3. Employer contribution towards premium is tax-free.

4. Employee’s portion of premium is excluded from taxable income (if purchased off-exchange).

5. Plans are portable, you can bring your health plan with you through changes in employment.

6. Premium savings and potential government subsidies (for small business employees).

Reasons Companies Switch to an ICHRA

Large Renewals

High Claims

Low Participation

Network Issues

Carrier Issues

Employer Wants Out of Insurance Business

Unlike group health plans, ICHRAs offer:

No medical underwriting – no concerns with pre-existing conditions

No adverse selection

No minimum participation requirements

No minimum employer contributions