HEALTH INSURANCE BUDGET
Take Control Of Your
Health Insurance Budget
BY : BARRY E . FIELDS , PARTNER , EMPLOYEE BENEFITS JGS INSURANCE , A BALDWIN RISK PARTNER
WHAT IS AN ICHRA ?
ICHRA is short for Individual Coverage Health Reimbursement Arrangement . ICHRAs allow employers to reimburse employees a fixed amount of money each month for health insurance premiums and healthcare expenses . These arrangements are an alternative way of providing quality health insurance benefits to employees with the same tax benefits of a traditional group plan .
WHO CAN OFFER AN ICHRA AND WHO CAN PARTICIPATE ?
Employers of any size may offer an ICHRA to any eligible employee .
WHAT MAKES AN ICHRA DIFFERENT ?
When using an ICHRA , employers simply determine how much they want to contribute towards healthcare benefits and employees select their own insurance company and plan . Plan rates are community rated and not subject to underwriting , claims experience , or health conditions .
ADVANTAGES OF AN ICHRA
Many employers and employees realize immediate , often significant , cost savings when transitioning to an ICHRA . Because employees are free to choose their own insurance company and plan , employers don ’ t have to choose between reducing benefits or increasing employee costs to keep budgets intact .
EMPLOYER OBLIGATIONS
When offering an ICHRA , employers must do the following :
• have an ICHRA plan document prepared and made available to employees ,
• provide employees notice of the ICHRA plan prior to the initial effective date ,
• give employees the option to “ opt out ” of the plan with notice , and
• have a section 125 plan in place that allows employee contributions to be deducted pre-tax .
EMPLOYEE OBLIGATIONS
To receive benefits under an ICHRA , employees must :
• purchase a qualified plan , and
• submit proof of expense when requesting reimbursement of a qualified expense .
HEALTH PLANS THAT QUALIFY FOR ICHRA REIMBURSEMENT
In most states , there are several dozen unique plan designs available to employees , including HSA-eligible and traditional Co-Pay plans , that qualify for ICHRA reimbursement . In addition , Medicare Parts A , B , C , and D , and Medicare Supplements also qualify unless specifically excluded in the plan document .
OUT-OF-POCKET EXPENSES THAT QUALIFY FOR ICHRA REIMBURSEMENT
Out-of-pocket medical , dental , and vision expenses ( defined by IRS Code § 213 ( d ))— including co-pays , deductibles , and co-insurance — qualify for reimbursement at the discretion of the employer .
PAYING PREMIUMS
Employers may pay insurance companies on behalf of each employee and payroll deduct the employee contribution in a traditional “ group plan ” format . Alternatively , employers may require employees to pay the entire premium and submit a reimbursement request for the employer contribution .
FSA AND HSA COMPATIBILITY
ICHRAs are compatible with both health care flexible spending accounts ( FSAs ) and health saving accounts ( HSAs ).
DETERMINING THE EMPLOYER CONTRIBUTION
Because individual premiums for qualified plans are “ age-rated ” ( i . e ., they increase with age ), the most equitable approach is to calculate age-specific contributions . This ensures younger and older employees are paying the same on a percentage-of-premium basis .
AFFORDABLE CARE ACT ( ACA ) AND COBRA COMPLIANCE
ICHRA plans are considered ACA compliant as all qualified plans provide minimum essential coverage and employer contributions can be structured to be affordable .
KEYS TO A SUCCESSFUL TRANSITION
Although the ICHRA plan year resets on January 1 , employers can transition to an ICHRA any time during the year . The keys to success are effective employee education , making it easy for employees to find and purchase their plan , and paying premiums on behalf of employees with a payroll deduction process to capture employee contributions .
Please call if you have any questions or would like to request an analysis . +
Barry Fields has over 30 years of employee benefits experience advising clients in a wide range of industries , professional and industrial , public and private , throughout the United States and worldwide .
Barry specializes in providing full-service benefits consulting to clients including program design , compliance , plan funding , underwriting , wellness programs , employee communications , benefits administration , employee advocacy and the use of effective strategies in benefits management .
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