Why an ICHRA could be the perfect employee health benefits solution for your business

August 23, 2023

The Individual Coverage Health Reimbursement Arrangement (ICHRA) can be an ideal choice for employers who want to contribute to their employees’ health benefits with more flexibility – giving employees personalized coverage options through the individual market, in a way that’s still tax-advantaged for the employer, as with a traditional group plan.

When employers administer ICHRA through Gravie, they can have confidence knowing we’re with them every step of the way. We assign an implementation manager and account manager to each Gravie ICHRA employer, helping them navigate all of the paperwork, onboarding, and more. Employees are also given a breadth of resources starting with our intuitive online platform for a simplified shopping experience, and access to Gravie Care® advisors who can answer questions and help them navigate it all from start to finish.

With Gravie, employers can choose to offer just an ICHRA to all employees, or they can offer it alongside another group plan option such as Comfort® — or even tailor their offerings for different subsets of their employees.

ICHRA: Flexible benefits for employers and employees

Ready to take the next step and learn more about offering Gravie ICHRA? Here’s how it works:

  1. Determine eligibility and define contribution: The employer determines their employees’ eligibility requirements and how much money they want to contribute to each group of employees via the ICHRA.
  2. Purchase individual plans: Employees use the funds from their ICHRA to enroll in individual health insurance. Gravie offers support during the health plan selection process through an online portal or by phone. 
  3. Payment or reimbursement of premiums: Gravie’s payment system will pay carriers using the employer’s ICHRA contribution and the employees’ payroll deductions (if applicable).

Both employers and employees benefit from Gravie ICHRA

  • Cost control: The employer determines their health benefits budget and how much they want to contribute to each employees’ ICHRA, allowing for greater predictability — and sustainability — over time.
  • Choice: Employees choose the individual health plan that best meets their unique health needs, lifestyle, and budget. 
  • Less Administrative Work: Employees work directly with Gravie and their chosen insurance carrier, reducing administrative work for the employer. 

For more answers to frequently asked questions about ICHRA, read on.

ICHRA: Frequently Asked Questions

For employers that want to contribute to employees’ health benefits but do so in a more flexible manner – letting individuals shop for their own plans through the individual market – an Individual Coverage Health Reimbursement Arrangement (ICHRA) can be the ideal option.

With Gravie ICHRA, employers not only get the benefits of the ICHRA, but a user-friendly platform and dedicated support teams to guide both the administrative process for employers and the shopping and enrolling experience for employees. 

Employers and brokers are always welcome to reach out to their account representative for any questions. Below are the most common ones we receive:

What are the differences between an ICHRA and a traditional Health Reimbursement Arrangement (HRA)?

A traditional HRA needs to be integrated with a traditional group health plan, while an ICHRA works in conjunction with individual insurance plans. Employers that offer an ICHRA cannot offer a group health plan to the same class of employees.

What types of employers qualify to offer ICHRA?

All businesses are eligible to offer an ICHRA as long as 1) a QSEHRA or Excepted Benefit Health Reimbursement Arrangement (EBHRA) is not already offered, and 2) a traditional group plan and an ICHRA are not offered simultaneously to the same class of employees.

If I am the owner or more than 2% shareholder of an S corporation, am I eligible to participate in the ICHRA?

No. Owners or more than 2% shareholders of an S corporation and their dependents are generally not eligible to participate in the ICHRA on a tax-advantaged basis.

What is the difference between a Qualified Small Employer Health Reimbursement Arrangement (QSEHRA) and an Individual Coverage Health Reimbursement Arrangement (ICHRA)?

  • The QSEHRA can only be offered by businesses with fewer than 50 employees, while the ICHRA can be offered by all employers regardless of size.
  • The QSEHRA has annual contribution limits, while the ICHRA does not.
  • With an ICHRA, both the employer’s HRA contributions and employees’ payroll deductions may be tax-advantaged.

Can employees choose any individual health plan?

  • Employees who use the ICHRA must select an Affordable Care Act (ACA) compliant individual health insurance plan or enroll in Medicare coverage.
  • If an employee also takes advantage of pre-tax payroll deductions under a Section 125 cafeteria plan, the individual insurance plan cannot be purchased on a federal or a state-based health insurance exchange.

What are my responsibilities as an employer?

  • Notify eligible employees at least 90 days prior to offering the ICHRA.
  • The ICHRA is considered a group health plan and all the related compliance requirements apply. Contact Gravie if you have questions.
  • Build an employee eligibility and contribution strategy. Although not difficult, deciding who is eligible for your ICHRA offering and what amount they are eligible to receive is important and requires careful consideration. Your Gravie account manager can help provide guidance and recommendations.

How much do I have to contribute to the ICHRA?

There are no annual minimum or maximum contribution limits. Applicable Large Employers (ALEs) must contribute enough to meet the ACA’s affordability requirements in order to mitigate ACA penalties for shared responsibility payments. Employees enrolled in the ICHRA are not eligible to receive premium tax credits toward their individual policy.

What happens if employer contributions are deemed unaffordable?

If the employer contributions are deemed unaffordable, the employer may be subject to ACA’s shared responsibility payments. Employees will be able to waive enrollment in the ICHRA and apply for premium tax credits through federal or state-based health insurance exchanges.

What reimbursement rules do I need to follow as an employer?

Employers can offer employees any amount of money through an ICHRA that can be used to purchase medical insurance as long as it is offered fairly to each employee within a designated employee class. Employers can choose to structure their eligibility and contribution criteria using 11 employee classes defined by the ICHRA regulations:

  • Full-time employees
  • Part-time employees 
  • Seasonal employees
  • Employees covered by a collective bargaining agreement
  • Employees who have not satisfied a waiting period for coverage
  • Salaried employees
  • Non-salaried employees
  • Temporary employees of staffing firms
  • Non-resident aliens with no US-based income
  • Employees in the same geographic rating area
  • Any combination of two or more classes from above

ICHRAs allow for flexibility as employers can vary contribution amounts by employee class. For example, an employer could offer one amount to full-time employees and a different amount to part-time employees, or those who live in New York vs. those who live in Minnesota. There is no limit to the number of employee classes an employer sets up, as long as they fall within the 11 categories listed above. There is a minimum number of employees that must be in each class, which varies based on employer size.

Want to learn more about Gravie’s ICHRA offering? Click here to download the Gravie ICHRA eBook.

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