What’s an ICHRA and How Does It Work?

By Team Orca
Sep 7, 2022

Individual Coverage Health Reimbursement Arrangement (ICHRA) provides tax-free reimbursement on healthcare premiums and expenses. It’s a game-changer for employers who want to give their workers more health coverage options and a more customizable plan design.

Key Takeaways

  • ICHRA gives employees more choice and power with an Individual Coverage Health Reimbursement Arrangement 
  • You can offer more diversity through reimbursement
  • With employee classes, enjoy unlimited annual reimbursements and craft the design you want
  • Employers can save up to 20-30% off their healthcare costs
  • Venteur makes it even easier for employees to participate in an ICHRA by paying premiums on their behalf, so no one has to wait for a refund

It’s an understatement to say that today’s health insurance market is tough, especially for employees. It can be a total nightmare to manage and understand health coverage.

They might be paying loads and loads for a plan that just isn’t working for their needs. And to top it off, medical expenses on top of insurance costs are inching up and up. 

According to our friends at the Kaiser Family Foundation:

A half of U.S. adults say they are struggling to afford healthcare costs.
A quarter of adults says they skipped a prescription or didn’t refill a needed prescription because of costs. A third of insured adults say they’re worried about if they can afford their monthly premium costs.

healthcare costs are unaffordable for half of adults.
(Source: KFF Health Care Debt Survey: Feb.-Mar. 2022)

Traditionally, employees don’t have many options since employers pick the plan for them and they’re stuck with it.

But as employee needs change, so do employer goals. And so do options. Now, many organizations are turning to ICHRA, a new kind of health reimbursement arrangement that puts health insurance choice back in the hands of employees.

Control, flexibility, and satisfaction. These benefits sound pretty appealing to your talent, right? Then you might be ready for an ICHRA. Here’s everything you need to know.

And as an employer, it means cost savings for you. On average, companies who offer ICHRA save 20-30% on healthcare benefit costs. That’s substantial to improve your bottom line. 

Let's break it down 

The first thing to know about ICHRA is that it’s a modern approach to health coverage. First introduced in January 2020, it’s a complete differentiator that helps you better support your workers and stand out as an employer (which we all know is a necessity in today’s job market).

You may be familiar with typical HRAs, where employers reimburse employees for qualifying healthcare expenses that aren’t covered by their health plans. An ICHRA is a type of integrated HRA, meaning it’s part of a traditional employee health plan. But an ICHRA gives workers benefits that other HRAs don’t. Namely:

  • Unlimited annual reimbursements (within the structure of the plan)
  • No employer size or participation limitations
  • Employers can create employee classes to diversify their offerings for specific groups

With a traditional ICHRA, employees select their desired healthcare coverage and pay for it themselves, then the employer reimburses them for it after they file a reimbursement claim. (Venteur can do this even easier, but more on that later.)

Oh, and did we mention that reimbursements are tax-free? They are.

ICHRAs have a predecessor called QSEHRA. While this offering has similar benefits, ICHRA gives employers more flexibility with design. Employers have complete control over plan design, reimbursement limits, and employee classes. And, the QSEHRA has stricter qualifications, so more employers can offer an ICHRA.

It’s pretty clear how great ICHRAs are for employers. What about employees? There are plenty of perks there, too, which is why employers who want to show their support on new levels turn to ICHRAs. 

Workers get a lot more choice over their health coverage with an ICHRA. They can simply select the option that better aligns with their healthcare needs or financial goals. They’re not tied down by whatever plan their employer chose for them. They can consider their own budget and health needs when browsing plans and select the best fit for them.

With this kind of control and flexibility, an ICHRA helps you empower your employees, and empowered employees are happier and more likely to stick around.

ICHRA vs Group Plans

Tell me how an ICHRA works!

Now it’s time to dig into the details. Let’s talk about the employee class feature we mentioned earlier, which is one of the biggest perks of an ICHRA.

The ICHRA framework allows you to offer benefits based on 11 different segments of employees, or classes. . 

  • Full-time employees
  • Part-time employees
  • Seasonal employees
  • Employees covered by a Collective Bargaining Agreement
  • Employees who have not satisfied a waiting period
  • Nonresident aliens with no U.S.-based income
  • Employees working in the same rating area
  • Salaried employees
  • Non-salaried employees (e.g. hourly)
  • Temporary employees of a staffing firm

Creating employee classes helps you offer different plan options for salaried workers and non-salaried workers. Or, you can set up different reimbursement guidelines for different employee classes. 

With this one feature, you’re able to customize what you offer all your employees, and today’s workers are all about customization and flexibility.

And, it’s all about good design.

Your unique ICHRA design will depend on your benefits budget, the number of employees you have, and the type of workers you have. But there are three different types of design plan options: flat contribution, target coverage levels, and target spending levels.

If you’re not sure which design is best for you, don't worry. We will conduct a benchmarking analysis and affordability check, so you know how to move forward.

How Venteur is different

It’s important to work with the right partner when you’re ready to offer an ICHRA and boost your employees’ satisfaction with their benefits.

With other ICHRA administrators, employees choose their plan, submit their proof and claim, and their employer reimburses them for it. 

But not with Venteur. We make it even easier for employees to get their coverage. All they have to do is select the plan of their choice. That’s it. We help them enroll and make all premium payments on their behalf.

Let’s break down those benefits:

  • You can customize your plan design and reimbursement amounts
  • There aren’t any annual reimbursement limits
  • You create employee classes to customize options further for employee segments
  • Workers have more choice and control over their coverage
  • All they have to do is select their plan

Offering a game-changer like an ICHRA helps you keep people on the payroll because they’ll appreciate that empowerment and support. It’s never been simpler to improve the way you offer health coverage and increase employee retention in the process.

Ready to get started? Reach out to Venteur to set up a free consultation today.

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