Ichra

What is ICHRA?

ICHRA is a new way for employers to offer health insurance benefits to their employees. ICHRA stands for Individual Coverage Health Reimbursement Arrangement. HRA’s have been around for some time and the Individual Coverage HRA was made available for employers to start using as of January 2020.

How it works?

An employer gives an employee a certain, fixed dollar amount every month in an HRA. The employee then uses that money to buy their own qualified health insurance. Neither the employer nor the employee are taxed on these contribution amounts.

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Employers design their ICHRA plans by deciding what the reimbursements will be for their employees. They can offer different levels of coverage to different classes. For example: part time vs full time.

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Employees then shop for their own health insurance coverage.

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Employee uses their monthly contribution amount to pay their monthly premium.

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They can also use any leftover funds to cover qualified medical expenses in some cases.

Why all the buzz?

ICHRA’s are new to the world of group health benefits. They are a product that disrupts the current group health insurance model that has been in existence for many years.

Current group brokers are not excited about ICHRA because it disrupts their very lucrative current commission arrangements that they have had for years.

ICHRA’s can save employers significant amounts of money that they are spending every year on traditional group health plans that are rising every year.

Because ICHRA’s are a defined contribution (employer gives employee a set amount each month), this allows employers to control costs. They give a set amount of money every month and they don’t have to worry about high utilizers and high claims because they no longer are insuring their employees. The employee is getting coverage directly from an insurance carrier.