• Businesses set the budgets
  You decide on a fixed amount to reimburse employees for health insurance and medical expenses. Employees can be grouped into different classes, like full-time or part-time.
• Vendors handle the administration
  Vendors can assist you with plan design, compliance and administration, or you can manage it yourself.
• Employees choose a plan
  Employees buy their own health insurance from the marketplace or private insurers, choosing plans that fit their needs and budget.
• Employees submit reimbursements
  Employees provide proof of coverage and expenses to get tax-free reimbursements up to the set limit.
• Optional payment facilitation
  An administrator can handle payroll withholdings and payments, mimicking traditional group plan mechanics.

As awareness grows, ICHRAs are becoming more popular. Small businesses have led the way, but larger companies are now showing interest. With their flexibility, ICHRAs are ideal for businesses with employees spread across different locations or with diverse health care needs, including seasonal or part-time workers.

• Cost control and predictability
  You can manage health care costs by setting fixed reimbursement amounts, avoiding unpredictable premium hikes. In many states, individual plan premiums may be lower than group alternatives.
• Flexibility
  ICHRAs let you address diverse health needs without a one-size-fits-all approach. Tailor reimbursement levels to different employee classes based on location or role.
• Personalized benefits package
  Customize your benefits to attract and retain top talent. If employees choose plans costing less than their allowance, leftover funds can cover other expenses like copayments or wellness programs.
• Compliance
  Properly structured ICHRAs meet Affordable Care Act (ACA) requirements, helping you avoid penalties. Brokers or ICHRA vendors can assist with compliance management.

It depends. If your business has 50 or more full-time equivalent employees (FTEs), you must meet the Click to see definition Affordable Care Act requirements by covering at least 95% of full-time employees and their children. The coverage must be affordable and meet minimum value standards. Businesses with fewer than 50 FTEs have no minimum coverage requirement and can set the allowance at any amount they choose. However, if the amount is too low, employees might not find the benefit attractive.

Yes, you can. There are specific rules for employees taking both options. The key is to create separate employee classes where each class can only use one type of benefit. For example, you might offer ICHRA to part-time employees and group health insurance to full-time employees.

Most businesses work with a vendor to help design and manage the plan. Vendors assist with verification and payment processes. Since ICHRAs are new, you may need to educate employees about them. A good administrator will have the technology and resources to help employees choose the best option. Typically, administrators charge on a Per Employee Per Month (PEPM) basis.

• Employee needs
  Understand your employees' health care needs. ICHRAs are ideal if you have diverse employee health care needs or a strong desire for benefits flexibility.
• Employee classes
  Define employee groups (e.g., full-time vs. part-time) and set reimbursement amounts that align with your company's goals. Administrators can help with class designations and administrative tasks.
• Market variability
  Be aware that insurance options and costs can vary by location. For example, California may have different plan options and rates than Georgia.
• Employee education
  Employees may need education on ICHRA options and guidance to navigate the insurance market and reimbursement process.

Businesses that offer an ICHRA are generally not eligible for the Small Business Health Care Tax Credit.*

However, offering an ICHRA can still provide tax advantages. Employer contributions to an ICHRA are typically tax-deductible as a business expense and the reimbursements employees receive for health insurance premiums and qualified medical expenses are generally tax-free for both the employer and the employee. It's important to note that employees using an ICHRA typically cannot receive premium tax credits.

* This material does not constitute tax advice. Businesses offering an ICHRA should consult with a tax professional to understand the specific implications for tax credits and other tax-related matters.

Learn more on IRS.gov

Employees may need education on ICHRA options and guidance to navigate the insurance market and reimbursement process. Consider providing resources or workshops to help them understand their choices and the benefits of ICHRAs.