Compliance Guide

Enrollment in individual health coverage or Medicare.

In order to participate in the ICHRA, all individuals (including spouses and dependents) must be enrolled in individual health coverage or Medicare and provide proof of that coverage. In other words, the ICHRA must be “integrated” with individual health coverage or Medicare.

Individual health coverage includes coverage purchased through a public Exchange, coverage purchased directly from an insurance carrier outside the Exchange, and coverage sold through a private exchange.

1. It includes student health insurance, catastrophic coverage, grandmothered coverage and grandfathered coverage.
2. It does NOT include short-term, limited-duration insurance (STLDI), coverage that consists solely of excepted benefits, TRICARE or coverage purchased through a healthcare sharing ministry.

Medicare coverage must be Medicare Part A and B or Part C.

Substantiation of individual health coverage or Medicare.

Before allowing enrollment in the ICHRA or providing reimbursement for premiums or other §213(d) qualifying medical expenses, the plan must obtain substantiation of enrollment in individual health coverage or Medicare from the employee as well as for spouses or dependents requesting enrollment or reimbursement. 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. So participants must confirm enrollment in individual health coverage or Medicare annually as well as each time a request is made for ICHRA reimbursement.

1. Annual Substantiation: Prior to initial enrollment, or prior to enrollment via the plan’s open enrollment period, the plan must verify that employees, spouses and dependents enrolling in the ICHRA are, or will be, enrolled in individual health coverage or Medicare during the plan year. Such verification must generally occur no later than the first day of ICHRA enrollment or coverage. NOTE: There is an exception for when a new dependent’s coverage is added retroactively…verification must be provided prior to any medical expenses being reimbursed.
2. Ongoing Substantiation: Prior to any reimbursement from the ICHRA, the individual requesting reimbursement must provide substantiation that the individual was enrolled in individual health insurance coverage or Medicare for the month during which the expense(s) were incurred.

Plans have some flexibility in determining what type of substantiation it will accept to prove enrollment in individual health coverage or Medicare. While the plan could require third party verification, simply collecting an attestation of enrollment or coverage from participants is adequate. The following is a list of potential methods for annual or ongoing substantiation of individual health coverage or Medicare (not meant to be exhaustive):

1. A document from a third party (likely the insurance carrier or Exchange) such as an insurance card, completed application with plan selection, or explanation of benefits.
2. A list bill from an insurance carrier showing all covered individuals.
3. Electronic substantiation – e.g. debit card technology.
4. Direct payment of the insurance premiums.
5. An attestation stating that the employee and an spouse and dependent(s) are, or will be, enrolled in individual health coverage or Medicare, the date coverage began or will begin, and the name of the provider of the coverage.

The agencies have provided a model attestation form that may be used for both annual and ongoing substantiation. It can be found here – https://www.dol.gov/sites/dolgov/files/ebsa/laws-and-regulations/rules-and-regulations/completed-rulemaking/1210-AB87/individual-coverage-model-attestation.pdf.

If ICHRA reimbursement is requested for qualifying medical expenses other than premiums, appropriate third-party verification of such expenses should be provided along with certification that the expense has not otherwise been reimbursed and that the individual will not seek reimbursement for the expense from any other plan. Ongoing substantiation of continued enrollment in individual health coverage or Medicare can be satisfied by collecting a written attestation from the participant on the same form used for requesting reimbursement.

Eligibility and reimbursement levels must be managed by “classes” of employees.

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. Only the following classes may be used:

1. Full-time employees (as defined under either §105(h) or §4980H);
2. Part-time employees (as defined under either §105(h) or §4980H);
3. Seasonal employees (as defined under either §105(h) or §4980H);
4. Salaried workers;
5. Non-salaried workers (e.g. hourly workers);
6. Employees working in the same geographic location (generally, the same insurance rating area, state, or multi-state region);
7. Employees covered by a collective bargaining agreement;
8. Employees who have not satisfied a waiting period;
9. Non-resident aliens with no U.S.-based income;
10. Temporary employees of staffing firms (assuming they are common law employees of the contracting employer and not of the staffing firm); or
11. Any group of employees formed by combining two or more of these classes.

*Classes can be defined separately for each entity within a controlled group or affiliated service group.

So, for example, if the ICHRA is offered to all full-time employees as defined under §4980H, all employees averaging 30 or more hours of service per week must be eligible for the ICHRA. It would also be possible to offer the ICHRA to all non-salaried, full-time employees (combining two of the permitted classes).

While the general rules is that the ICHRA must be offered on the same terms to all employees within a specified class, there is a bit of flexibility to vary the dollar amount based on age (3:1) or number of dependents eligible for reimbursement. Individual health coverage premiums vary by age, so it may make sense for employers to make a larger amount of reimbursement available to older employees. In addition, the employer may be willing to make a larger amount available to those employees who choose to also enroll their spouse and dependents.

Employees offered the ICHRA cannot also be offered a traditional group medical plan.

Those employees offered an ICHRA cannot also be offered a traditional medical plan by the same employer. Employees cannot be given a choice between the traditional group medical plan and the ICHRA. If the ICHRA is offered within a class (as specified above), none of the employees within that class may also be eligible for the employer’s traditional group medical plan, if any.

There is a special transition relief rule to help employers transition into offering an ICHRA. Within a specified class, employers may offer the ICHRA only to new hires after a particular date (any time after Jan 1, 2020) while allowing existing employees to continue on the traditional group medical plan.

If an employer offers a traditional medical plan to some employees and an ICHRA other employees, it may be necessary to consider minimum class size rules. A minimum class size rule applies when the employer offers a traditional group medical plan to some employees and an ICHRA to other employees in the following classes: full-time, part-time, salaried, non-salaried, or geographic location (if the location is smaller than a state). The minimum class size rules indicates that a minimum number of employees must be eligible for the ICHRA if the ICHRA is offered to employees who are full-time, part-time, salaried, non-salaried, or in a geographic location smaller than a state.. See the minimum class requirements in the table below:

Participants must be able to opt out of coverage and waive future reimbursement.

The ICHRA is considered minimum essential coverage (MEC). Any individual who enrolls in an ICHRA is then ineligible for a premium tax credit (PTC) when purchasing individual health insurance through a public Exchange. This is true no matter what amount of reimbursement is available via the ICHRA. Therefore, 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.

An annual notice must be provided to eligible individuals.

Employees 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. The notice is meant to help individuals understand the coverage available via the ICHRA and how the ICHRA may impact eligibility for a PTC toward coverage through a public Exchange.

A model notice provided by the agencies can be found here – https://www.dol.gov/sites/dolgov/files/ebsa/laws-and-regulations/rules-and-regulations/completed-rulemaking/1210-AB87/individual-coverage-model-notice.pdf. The model notice provides basic information about how the ICHRA affects eligibility for a PTC toward public Exchange coverage. It also provides general information about how to obtain individual health coverage and enrollment timeframes. The notice should be tailored to indicate who is eligible for the ICHRA, the maximum dollar amount available, substantiation requirements for participation and what expenses qualify for reimbursement.