Why Choose an ICHRA for Your Health Care Needs?

If you are new to this model, you may be asking: What does ICHRA stand for? ICHRA stands for Individual Coverage Health Reimbursement Arrangement.

ICHRAs are an innovative way for employers to provide a health insurance policy by offering tax-free reimbursements for premiums instead of buying a single plan for the entire company. Rather than a group insurance plan, each employee chooses their own insurance, subsidized by a pre-tax employer contribution.

ICHRAs are for Employers Who:

• Have unaffordable coverage or unsustainable increases to their health insurance premiums
• Have a diverse workforce with different healthcare needs
• Want to offer health benefits/more choice to attract talent
• Have employees in multiple states without a single-carrier solution
• No longer want to manage health risk across their workforce
• Have eligible employees based on their job classification and the classes set by the employer.

• Group insurance can be prohibitively expensive for some businesses and/or bring unsustainable increases in premiums each year
• Group insurance forces employees to pick from a limited selection of plans that might not fit their needs – especially in diverse workforces
• ICHRAs change that by making health coverage expenses more predictable (and in many cases more affordable), and by making health plans personalized for each employee’s needs
• As a group insurance alternative, ICHRA benefits mean flexible and affordable health coverage for employers and employees
• ICHRAs offer tax advantages like tax-free reimbursements and tax deductions for employers

Because they’re a newer form of insurance, most people wonder about how to set up an ICHRA. The ICHRA administration process is more straightforward than most employers expect. Here is how it works:

1. Select a Benefits Platform — Benefits platforms act as an administrator, coordinating transactions, providing decision support to employees, and serving as a place to enroll.
2. Define Your Contribution — Set your overall budget and the pre-tax contribution you’ll make to each eligible employee class.
3. Employees Shop & Enroll — Employees shop marketplace plans based on their individual needs and enroll through your chosen benefits platform.
4. Employees Get Reimbursed — Employees are reimbursed for health coverage based on employer-defined contributions.

With a group health plan, the employer selects one policy for all employees. With an ICHRA, the employer sets a reimbursement budget and each employee independently selects the plan that fits their needs, giving employees choice and employers predictable costs.

ICHRAs, as described in the 2019 Final Rule (2019-12571, 84 FR 28888) and its attendant federal, state, and local laws and regulations.