Background and basics
Here we will review some of the most important ICHRA rules. Many of these are covered in more detail in subsequent lessons.
Like traditional HRAs, ICHRAs must be funded solely by employer contributions. With traditional HRAs, employers must generally contribute the same amount toward coverage for similarly situated employees. However, employer contributions to an ICHRA can vary by age up to a 3:1 difference between the youngest and oldest employees, and by number of dependents. This is because ICHRAs will be used to reimburse employees for individual health insurance where premiums are age rated and plan cost depends on the number of dependents covered.
Employees can use reimbursements from an ICHRA to pay for individual health insurance purchased through a public Exchange or Marketplace, or policies purchased directly from a carrier (off-exchange). Employees can also use ICHRA reimbursements to pay for premiums for Medicare and Medicare supplemental health insurance (Medigap).
An ICHRA can also be set up to reimburse other §213(d) expenses (like traditional HRAs), though this is not required. Many employers will set up ICHRAs solely for the purpose of reimbursing employees for individual health insurance premiums.
If the ICHRA does not cover the entire cost of the individual health insurance, employees can pay their portion of the premium pre-tax through a §125 plan, but only for polices purchased “off-Exchange”.
An ICHRA must be “integrated” with individual health insurance. This means that in any given month, an employee and their dependents must be covered by an individual plan to receive reimbursements from the ICHRA. The ICHRA can be integrated with:
- Individual health insurance coverage (Exchange or non-Exchange coverage), including student health insurance, catastrophic coverage, and “grandmothered” or grandfathered individual coverage
- Medicare Parts A and B, Part C, or Medicare Supplement Policies
An ICHRA cannot be integrated with short-term, limited-duration insurance (STLDI), coverage that consists solely of excepted benefits, TRICARE, or healthcare sharing ministries.
A very important ICHRA rule is that employers can offer the ICHRA only by employee classifications that are defined in the rules. A class of employees who is offered an ICHRA cannot also be eligible for the employer’s traditional group health plan. If an employer offers an ICHRA to one of these employee classifications the ICHRA must be offered on the same terms for all employees in a class. Employers can also combine classes for the purpose of defining ICHRA eligibility. For example, an employer could offer an ICHRA to all non-salaried workers in a particular state. Employee classification will be covered in more detail in Lesson 2.
Once all topics are complete, take the quiz.