Individual Coverage Health Reimbursement Arragements, or ICHRA plans, hit the market in early 2020 giving employers a way to give tax free reimbursements for insurance premiums to employees that enroll in an Affordable Care Act compliant individual health insurance plan, or in Medicare A and B or C.
That being said, there are some legal considerations an organization should be mindful of prior to entering into this type of arrangement. You must comply with all the same general requirements that apply to traditional “group” health plans. For employers subject to ERISA, this includes a plan document, a summary plan description and, if applicable, filings of form 5500. An employer would also be subject to other laws such as COBRA and HIPAA. While this type of plan offers obvious flexibility in that it is not a one size fits all, it also offers the employer an opportunity to define the contribution amount it will reimburse the employees. The employer has flexibility in that it can offer all employees the same amount or it can vary the contribution by full-time, part-time, hourly or even vary by employee age and family status.
Due to this type of plan being a “defined” approach, the employer has a better handle on his or her budget predictions. In traditional insurance the annual increases are not often predictable, in this approach the employer can keep the amount the same each year. Additionally, under the traditional insurance model, the employer has to choose what type of plans to offer while the ICHRA puts the decision-making process in the employee’s hands.
While there are no annual minimum or maximum contribution limit, employers who are subject to ACA’s shared responsibility provisions should keep in mind that if they contribute enough to be deemed affordable, they will avoid ACA’s shared responsibility payments. One last item, any employee who enrolls in the ICHRA is NOT eligible to receive premium tax credits.
If as an employer you are interested in exploring the benefits of this type of plan arrangement feel free to contact us at MedCon Benefit Systems Group, Inc.