ICHRAs, or Individual Coverage Health Reimbursement Arrangements are an innovative, new way for businesses to provide their employees with health insurance. Here's what you need to know about them.
ICHRAs popped up in 2020, thanks to changes in regulation.
First off, how does an ICHRA work?
1. Businesses provide their employees with a pre-tax stipend.
2. Employees use this stipend to buy health insurance.
How much money can a company give employees for health insurance?
There is no limit. Companies can give as much as they want through ICHRAs.
Is there a minimum amount that employers must give for health insurance?
Yes. Employee health insurance cannot cost more than 9.12% of their income in 2023 or 8.39% of their income in 2024. If it does, the ICHRA is considered unaffordable.
The good news for employees is that if the stipend provided by their employer is not "affordable," they can ditch the ICHRA and get a marketplace subsidy instead. Read more here about ACA Affordability rules.
Can you offer a group health plan and an ICHRA at the same time?
No. It's either or. Employers can't let workers pick between a group health plan and an ICHRA.
Are there rules for what type of health insurance an employee can buy using an ICHRA?
Yes. Only “Qualified Health Plans” are reimbursement under an ICHRA. All this means your health plan meets all the consumer protections under the Affordable Care Act (ACA). No junk plans allowed!
What else does an ICHRA pay for?
ICHRAs can cover other medical costs. Say, for example, your employer provides you with $1000 per month, but you pick a plan that only costs $500. The remaining money goes into your Health Wallet. You can use the remaining $500 per month to pay for out-of-pocket health insurance.
And there you have it! ICHRA explained without the jargon. 🌟👩⚕️👨⚕️🌟