HRA – WHAT SETS US APART?
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Now, more than ever, healthcare dollars need to go further. With an ICHRA, they can.
Through an Individual Coverage Health Reimbursement Arrangement (ICHRA), you receive tax-free money from your employer to help cover medical insurance premiums for insurance plans you purchase on the individual market. That means fewer out-of-pocket healthcare costs for you and more money in your pocket.
What is an Individual Coverage Health Reimbursement Arrangement (ICHRA)?
An ICHRA is a program that is fully funded by your employer and is designed to help you pay for your individually purchased medical insurance premiums.
How it Works
Your employer put money into your ICHRA when you chose to waive coverage through the group medical insurance plan, are not covered under your spouse’s or parents’ insurance plan(s), and you do not have received any tax stipend through the Affordable Care Act for your insurance premium.
If you meet those requirements, your employer will contribute their set contribution amount towards your monthly premium bill. Because the money contributed by your employer doesn’t count as income, there are no tax implications. It’s kind of like getting a raise. Check with your Human Resources department or Plan Administrator for more information about your plan design.
Do I have to have health insurance to have an ICHRA?
Yes, to receive the monthly contribution from your employer toward your ICHRA, you must have medical insurance purchased on the private market. If you have medical insurance through your employer or your spouse’s employer, you cannot participate in the ICHRA.
How do I know how much it contributed to my HRA each plan year?
At the beginning of each plan year, your employer will notify you of the amount they will contribute to your ICHRA for that plan year.
Do I need to enroll in each plan period?
Yes. All eligible employees must enroll each year during the open enrollment period. Your employer will instruct you on how to complete enrollment.
Interested in More Information?
Comparing HRAs, QSEHRAs, ICHRAs, and EBHRAs
Providing a summary of tax and related compliance issues applicable to HRAs, QSEHRAs, ICHRAs and EBHRAs. Plan Design / Compliance Issue HRAs QSEHRAs ICHRAs EBHRAs
Eligible Employer Any employer, but must offer HRA with sponsor group health plan. An employer must not be an ALE and not sponsor group health plan. Any employer, but cannot offer group plan for those eligible for ICHRA. Any employer must sponsor group health plan but cannot offer ICHRA to those eligible
Eligible Employees Group eligible must pass eligibility test under Code §105(h) Any employee of the “eligible employer,” and allows certain employees to be excluded A group of employees defined by the employer participating in individual coverage, but cannot be eligible for group coverage or EBHRA. Deemed to pass nondiscrimination rules under Code §105(h) if meet rules. A group of all similarly situated individuals as defined by the employer, but cannot be offer ICHRA and group must pass nondiscrimination rules under Code
§105(h). When employees are eligible to participate A waiting period cannot exceed 90 days. When employee is no longer considered an excluded employee. A waiting period cannot exceed 90 days. A waiting period can exceed 90 days.
Salary Reduction Funding Not permitted, but can be offered with Health FSA and POP Not permitted, but can be offered with Health FSA and POP. Not permitted, but can be offered with Health FSA and POP.
Eligible for HSA contributions Yes, if reimburses only dental, vision and preventive care or post- deductible expenses Likely yes, if reimburses only individual coverage premiums Likely yes, if reimburses only individual coverage premiums and certain excepted benefits (e.g., dental or vision) Yes, if reimburses only dental or vision expenses
Permitted Amount of Contributions Amount available is determined by the employer For 2019, self-only coverage is $5,150 & $10,450 for family coverage Amount available is determined by employer For 2020, $1,800, amount will increase in 2021 and after
Carryover Of Unused Amounts Permitted
Medical Expenses Eligible For Reimbursement Otherwise unreimbursed Code §§213(d) medical expenses incurred while coverage in effect, including premiums for group eligible health insurance and long-term care insurance Reimburse individual major medical health insurance premiums, as well as other Code Section 213(d) expenses incurred during the QSEHRA coverage period, is permitted. Reimburse any Code Section 213(d) medical care expenses or to limit reimbursements to particular expenses (e.g., premiums), but not group health coverage. Reimburse any Code Section 213(d) medical expenses but not premiums for individual health coverage, Medicare, or non-COBRA group coverage (premiums for coverage consisting solely of excepted benefits can be reimbursed).
Cash-Outs Of Unused Amounts (If No Medical Expenses) Not permitted
12-Month Period Of Coverage & Prohibition Of Mid-Year Changes – Not Applicable
Health FSA Uniform Coverage Requirement Not Applicable — i.e., coverage level may be prorated by plan design Not Applicable.
Expense Substantiation Required Required
Claims Adjudication Required Required
Plan Design/ Compliance Issue HRAs QSEHRAs ICHRAs EBHRAs
Tax Credit HRA is considered with group health plan coverage to determine the minimum value and affordability Not applicable Yes, under Code §4980H(a); possibly, under Code §4980H(b) (coverage must be affordable) Not Applicable
Code §105(h) Nondiscrimination Requirement Applies Not applicable, if meets the eligibility rules Applies, but the maximum reimbursement amount can vary between classes as provided under the ICHRA rules. ICHRAs must not be nondiscriminatory in the operation of the plan. ICHRAs that reimburse insurance premiums will be treated similarly to a fully- insured group insurance plan for nondiscrimination testing. Applies
Funding Requirement Not required—employers can decide to fund (i.e. set aside funds) as potential liability increases, but any such funding can invoke ERISA’s trust requirement if amounts are segregated from general assets.
ERISA Requirements Applies
COBRA Applies –Employer has 20 or more employees Does not apply Applies –Employer has 20 or more employees Applies –Employer has 20 or more employees