How an Individual Coverage HRA Could Help Your Business
Whether you are a fan of the Affordable Care Act or not, one thing that is hard to deny is that the law has forced a lot of people to think outside the box. It has resulted in a number of creative new options for covering healthcare costs. One such option is the Individual Coverage Health Reimbursement Arrangement (ICHRA).
The ICHRA represents a unique and creative way to financially contribute to covering healthcare costs among employees who seek health insurance through the federal marketplace. A carefully developed ICHRA arrangement can save both employee and employer money without sacrificing coverage. What’s more, employers can offer ICHRAs and traditional health insurance plans simultaneously, though certain restrictions apply.
How the ICHRA Works
The ICHRA model is based on an arrangement between employer and employee. Under that arrangement, the employee agrees to get their health insurance through a federal marketplace or another individual option. In return, the employer agrees to reimburse the employee a certain amount of money. That money can go toward paying insurance premiums or covering any qualifying out-of-pocket medical costs.
Let us say you own a small business that cannot afford to offer employees a group health plan. So you offer an ICHRA plan instead. You agree to reimburse each participating employee $400 per month, which is considerably less than you would pay for a group health insurance plan. Your employees with coverage under a federal marketplace can use your contributions to offset their own premium payments. You and your employees both save money as a result.
For the record, employees do not have to be enrolled in federal marketplace insurance plans to qualify. They can be enrolled in any individual health insurance option they obtain for themselves.
Offering Both Options
The ICHRA system obviously has its own eligibility requirements. There are also rules governing how employers can use it. For instance, employers can offer both the ICHRA option and a standard group health insurance plan simultaneously. But they cannot give employees a choice between the two.
This means that an employer can offer group health insurance to one set of employees and an ICHRA to another. They just cannot offer an employee both options and allow them to choose.
Employers also have the freedom to determine plan participation based on employee classes. For example, an employer may decide to require employees to work for the company for three or four months before they are eligible. They might limit the plan only to salaried or hourly workers. How they offer the ICHRA is fairly flexible as long as they meet minimum guidelines.
Setting up a Plan
Setting up a new ICHRA plan is not difficult. According to BenefitMall, a Dallas-based general agency that represents more than a hundred carriers and thousands of insurance brokers, employees don’t have to wait until the start of a new plan year. They can set up their ICHRA at any time.
Employers also do not need to utilize brokers to set up and administer ICHRAs. That does not preclude brokers from offering their assistance. At any rate, employers must provide employees with appropriate notice and complete the necessary paperwork to make the plan legal. Once a plan is established, annual notices need to be given to all eligible employees.
There is more to the ICHRA than this post has described. But at least now you have a basic understanding of how it could help you and your employees. A ICHRA plan can save money on both ends of the equation while still allowing your employees to access affordable health insurance.