All individuals eligible for reimbursement under the ICHRA must be enrolled in individual health coverage or Medicare and provide proof of that coverage. There is an annual substantiation requirement that applies prior to enrollment in the ICHRA, and an ongoing substantiation requirement that applies each time reimbursement is requested.
If the ICHRA is not being offered to all employees, it must be offered to all employees within a specified class, generally on the same terms.
Do you have procedures in place to ensure that ICHRAs are offered on the same terms to all employees within a specified class or combination of classes?
If the ICHRA is offered within a class of employees, none of the employees within that class may also be eligible for the employer’s traditional group medical plan, if any. In addition, if an employer offers a traditional medical plan to some employees and an ICHRA other employees, minimum class size rules apply.
Do you have procedures in place to ensure that employees who are offered an ICHRA are not also offered a traditional group medical plan by the same employer?
Do you have procedures in place to ensure the ICHRA meets minimum class size rules for employers who offer a traditional group medical plan to some employees and the ICHRA to other employees?
An ICHRA may be available to reimburse premiums, §213(d) qualifying medical expenses other than premiums, or a combination of the two. If the ICHRA will reimburse §213(d) qualifying medical expenses other than premiums, participants must be required to submit proper third-party substantiation before being reimbursed (or, alternatively, follow debit card procedures already approved for other types of HRAs and health FSAs).
Have you decided which types of reimbursement you can handle and how reimbursement for such expenses will be facilitated?
For premiums, have you decided whether you will pay the carriers directly, or require the premium payments be made by participants and then reimbursement requested?
For reimbursement of medical expenses other than premiums, do you have procedures in place to ensure that the ICHRA only reimburses eligible expenses for which proper third-party substantiation has been provided?
Most employees will need assistance navigating and enrolling in individual plan options. However, in order to avoid the individual health plans being subject to ERISA, the employer must not select or endorse any particular insurance carrier or coverage options, cannot receive any financial incentive, and must notify participants annually that the individual health insurance is not subject to ERISA. Individuals must be permitted to enroll in any qualifying individual health coverage, on or off-Exchange (i.e. the choice of plan must be completely voluntary).
Have you decided whether you will facilitate the purchase of individual health coverage as part of your product offering, find a partner who can provide such access or assistance, or require that individuals obtain individual coverage on their own?
If choosing to facilitate the process, will your design meet the ERISA safe harbor?
Employers and employees will need to understand the network access and cost/affordability of the individual coverage options. For affordability, there are several considerations:
Have you decided whether you will advise or assist (e.g. provide tools) with network access and affordability determinations, or instead recommend that they coordinate such efforts with counsel or benefits advisers?
Eligible participants must be given the option to opt out of ICHRA coverage and waive any future reimbursements in order to preserve PTC eligibility when applicable.
Do you have procedures in place to ensure that ICHRAs are designed to always allow individuals to opt-out of participation and waive any future reimbursements after terminating ICHRA coverage?
Employees who are eligible to participate in an ICHRA must be provided with a notice at least 90 days before the beginning of each plan year, or, for those who become eligible later or enroll after the beginning of the plan year, no later than the employee’s effective date of coverage.
Have you decided whether you will assist employers with preparing and making the annual notice available to eligible individuals?
An ICHRA is a self-funded group health plan that may require coverage reporting. In addition, applicable large employers will need data captured about offers of coverage, enrollment, and cost of coverage for IRS Form 1094-C and Form 1095-Cs.
Have you decided whether you will offer tools to track applicable data and assist in reporting coverage as well as offer of coverage information at the federal level and state level, if applicable?
Employers with 20 or more employees must offer ICHRA to individuals who loses eligibility due to a qualifying event (e.g. termination of employment, reduction in hours, a dependent aging out, divorce).
ICHRAs must have plan documentation, summary plan descriptions (SPDs) and a summary of benefits of coverage (SBC). The ICHRA may also be subject to annual Form 5500 reporting.
Reimbursement of §213(d) qualifying medical expenses, other than premiums or excepted benefits, prior to meeting the minimum deductible will make individuals ineligible to contribute to an HSA.
An ICHRA may differentiate amounts available by age or based on family size but cannot favor highly compensated individuals. If an employer also offers a self-funded traditional group medical plan, that plan must comply with §105(h) nondiscrimination rules. It might also be necessary to consider how the ICHRA offering impacts compliance with §125 nondiscrimination rules for cafeteria plans.
The ICHRA may be offered by employers of all sizes. Small employers may find it advantageous for different reasons than larger employers, and employer size may also impact the level and type of service required.
Some ICHRAs will be sold through brokers, while others may be sold directly to employers.
The ICHRA is a new product option for brokers, employers and employees. Most will require a basic level of education to understand and use the product.
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