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Adopting an Individual Coverage Health Reimbursement Arrangement (ICHRA) platform for company benefits allows employees to utilize the Advance Premium Tax Credit (APTC) on the ACA Marketplace. While an ICHRA classifies as a group benefit, the APTC provides subsidies to consumers based on their household income to make Qualified Health Plans (QHPs) affordable. An ICHRA and the APTC work hand in hand to provide affordable health coverage for employees.

Coexisting on the ACA Marketplace

With a traditional group plan, employees would often be confined to set deductibles, copays, and in-network provider guidelines. Each member under the ICHRA umbrella can then submit for reimbursement based on the expenses they incur specifically for that healthcare they want and need.
This hands-off approach to employers managing their own health insurance, instead of being trapped in the traditional one-size-fits-all plan for employees, grows even more appealing with the implementation of the American Rescue Plan (ARP).

An increase in the availability of the APTC lowers premiums across the board and allows employees covered by ICHRA to enjoy high-quality plans available at a lower cost. Coupled with the reimbursed funds being tax-exempt, ICHRA’s flexibility in allowing employees to take advantage of Marketplace savings will greatly increase the availability of quality health plans.

Employees opting into an ICHRA will have a designated period to secure and provide purchase proof of a health insurance plan of their choice. In addition, the ACA Marketplace offers the APTC and catered plan offerings that many can explore as ideal coverage. In most scenarios, employees can be reimbursed for copays, deductibles, and premiums.

APTC Impacts Affordability

Before approving your ICHRA plan and communicating the changes to employees, make sure that the coverage you are offering is Affordable for all employees. According to the IRS, if an employee pays 9.61% of their annual household income or less for their insurance, it is deemed Affordable as of 2022.
A household’s tax credit amount is determined by a variety of factors designed to reflect financial need:

  • Total expected yearly income
  • Number of individuals included on the household tax return
  • The cost of the second lowest silver plan -benchmark plan- available in the consumer’s area
  • Household income compared to the federal poverty levels

Using the benchmark of the lowest-cost silver plan, the annual out-of-pocket cost after the APTC and ICHRA contribution should be less than 9.61% of the employee’s annual household income. The maximum employee contribution is down from 2021’s 9.83%. The ARP makes it much more affordable for individuals to secure coverage through the Marketplace. The increased availability of tax credits to be used towards plan premiums and the reduction of the minimum contribution amount will lower plan costs.

Third-Party Administrators Can Help Capitalize on Savings

If you have a sizable employee roster and you need help with a transition to an ICHRA, there are third-party administrators who can help. For Example, W3LL can help you with everything from developing your ICHRA platform to launching and managing ongoing reimbursements and analytics.

Pete English With nearly two decades in health insurance, Pete English’s diverse experience makes him uniquely qualified to help health plans and brokers leverage innovative technology in partnership with W3LL. From growing sales staff by 126% over 4 years at a large health plan, to building his own health insurance brokerage firm from scratch with over $7.2MM in annualized premium, Pete has done it all.

Pete English
(631) 681-4898
PEnglish@w3ll.com