Small Business Guide to Individual Coverage HRAs (ICHRA)

For businesses of any size, offering some form of healthcare benefit is essential in attracting and maintaining talent. Perhaps more importantly, health benefits create significant tax savings when compared to wage increases, making them a must-have in the eyes of many employers.

But let’s face it: group health insurance isn’t a great fit for every company. If you are looking for a health benefit that is more affordable, more flexible, and more valuable than conventional insurance, then look no further.

The Individual Coverage Health Reimbursements Account (ICHRA) is here to change the way that you offer employment benefits.

Q: What is a Health Reimbursement Account (HRA)?

Brand-new in 2020, ICHRAs are a new type of HRA that make it possible for employers to reimburse their employees for the cost of health care.  This adds significant flexibility in how companies can offer health benefits, while also giving employees a choice of which plan to choose.

Here’s why HRAs are such a big deal:

• • Employer owned & controlled
  • Employees can choose their own health plan
  • No contribution minimum
  • All HRA contributions are tax-deductible, and tax-free for the employees
  • HRAs add a distinct, valuable benefit to your overall package
  • HRAs can be easily integrated with Medicare coverage

ICHRAs are a unique type of HRA because they are:

• • Available to companies of all sizes
  • Do not require a group insurance plan 
  • Provide a lot of options regarding which employees are eligible

Who ICHRAs are for

Businesses of all sizes can offer ICHRAs to their employees. However, these employees need to be enrolled in their own minimum essential care (MEC) health plan in order to qualify.

ICHRAs can be offered either on a stand-alone basis or in addition to a group insurance plan. Offering both is one way to create additional, specialized benefits for higher-tier employees. Companies that offer both an ICHRA and a group plan cannot force their employees to choose between the two.

Why HRA benefits are better than payroll increases

One of the biggest values of an ICHRA offer is that it can act as a viable substitute for base wage increases. Because you play all sorts of taxes on your employee’s wages, HRAs are dollar-for-dollar a much better deal for employers.

In addition, employees tend to see their HRA reimbursements as a distinct benefit. In other words, this reimbursement will always be ‘in addition to’ their salary. Wage increases, on the other hand, can be quickly forgotten by the employee, or expected every year. HRAs add persistent, ever-present value.

For many employees, having the option to choose their own health plan is a benefit in itself. HRAs are the only benefit offer that gives your people this kind of freedom.

How ICHRAs work

Setting up an employee HRA is simple, and for the most part, everything is handled by your HRA administrator.

1. 1. Decide how much you want to contribute. This usually a flat-rate reimbursement, but can also be used to reimburse employees for copays and out-of-pocket costs. As the employer, you get to make the rules of how the HRA funds can be used.
   2. Announce your open enrollment period. Your employees will have 60 days to signup for a health plan with Minimum Essential Coverage (MEC). If  they already have an MEC health insurance plan, they can enroll following an employer-established waiting period. 
   3. Your HRA administrator handles the rest. Once your ICHRA is up and running, your HRA administrator handles the rest. This includes making reimbursements and protecting your team’s private medical information.

Know your options for small business health benefits

As a small employer, it can be difficult to even consider the cost of health benefits. But with the versatile, simplistic power of an HRA, it can cost anything you want.

But HRAs aren’t the only option on the table when it comes to health benefits. As a small employer, you could qualify for huge tax credits on group insurance plans, making them more affordable than ever. Or, if your company needs something less expensive and a bit more out-of-the-box, then group health sharing could be the way to go.

Your Personal Benefits Manager is your go-to strategist when it comes to group benefits. We can help you understand the options that are available, and organize and implement the one that is right for you. Call today to schedule an appointment.

Click here to schedule an appointment, or call 800-913-0172 to get started.    

To your health and wealth,

Wiley P. Long, III
President - HSA for America

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