ICHRA Frequently

Asked Questions

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Let’s face it. What we do here is not easy! But that’s our problem to solve. We try to make it as streamlined for you as possible. But you still have questions, and we know that. We’ve taken the most common questions about W3LL and our offerings and have curated them in one place.

The Basics

What is ICHRA?

ICHRA stands for Individual Coverage Health Reimbursement Arrangement. Here is an overview of ICHRA.

Are ICHRA benefits available in all states?

Yes! ICHRA benefits are available in all 50 states.

What is the difference between ICHRA and a regular HRA?

The primary difference is that standard HRAs fall under the jurisdiction of Internal Revenue Code Section 125 Cafeteria Plan regulations, which means in part that they can only be used for group-sponsored health or ancillary plans. An ICHRA offers the same tax benefits to employers but allows employees to shop for their own medical insurance on public marketplaces.

 

Is an ICHRA a group plan or an individual plan?

An ICHRA is a benefit that is offered by the employer that allows the employee to search hundreds of plans on the ACA exchange to find the one that best suits them. It’s a group benefit with the personalization of an individual plan.

Do you have any resources to help explain the benefits of ICHRA to an employer?

Yes! Reach out to us for more information and some collateral you can use to explain the benefits of ICHRA to your clients.

ICHRA Classes

What are the 11 ICHRA classes?

ICHRA has been designed to meet the needs of 11 different classes of employees from full-time, to temporary; geographically diverse, to hourly. Read more about ICHRA classes on our blog.

 

Are there minimum class requirements?

Minimum class sizes only come into play when the employer offers both a traditional group plan and ICHRA benefits. If the employer is only offering ICHRA benefits, there are no class size minimums.

 

Can employers offer more money to individuals that are older?

In addition to the 11 classes, there are two variables that can be taken into account to adjust contribution: age and dependents.

What is the range of allowable contribution within the same class based on age and dependents?

If your business has older and younger employees in the same class and you choose to offer the oldest employees more money, the amount cannot be more than three times the allowance amount of the youngest employees in the class.

Can the employer offer multiple benefits to one class?

All members in a single class must be offered the same benefit. The allowed variables are age and dependents.

 

Can you only offer an ICHRA to employees that are working from home in a different state than the majority of employees?

Yes, you can offer geographically diverse employees an ICHRA while keeping your "home state" employees on a group plan.

Can we use ICHRA for overseas carriers?

ICHRAs only work for employees with US-based health plans that are available on US-based public or private marketplaces. Employees who work part of the year overseas but file taxes in the US can use an ICHRA towards qualified medical expenses.

ICHRA Design

How is the employer contribution determined?

The employer sets their contribution amount, and there is no minimum or maximum number. If the employer has 50 or more employees, they need to meet the affordability requirement when determining their contributions.

It is best to use a technology partner's decision tool, like W3LL's, to determine what the optimal contribution is per class so that they are deemed affordable.

 

Who actually pays the premiums?

The employee pays the premiums and then is reimbursed for a portion of the premium from the employer-managed ICHRA.

Can ICHRAs be used for both premiums and qualified medical expenses (QMEs)?

Yes, ICHRAs can be used for both health insurance premiums and qualified medical expenses.

Can ICHRA be used to support employees over 65? If so, what types of coverage can it be applied to?

ICHRA and Medicare can work together. To qualify for an ICHRA, the employees eligible for Medicare must have coverage of Part A and Part B together or Part C. Part B only (not drawing Social Security) by itself does not qualify as Minimal Essential Coverage.

An ICHRA may be used to reimburse premiums for Medicare and Medicare supplemental health insurance (Med Supp or Medigap) as well as other medical care expenses. The premiums for Parts A, B, C, and D, as well as Medigap policies, are all eligible for reimbursement.

Can a small employer offer an ICHRA and a group health plan?

Yes, an employer can offer one class of employees a traditional group plan and an ICHRA benefit to a different class. The same class of employee's cannot be offered both a traditional group plan and an ICHRA. Additionally, if an employer offers a traditional group benefit to any class of employees, then the minimum class sizes apply. An employer cannot offer two people within the same class different benefit types.

 

Can ICHRA be used to pay for ancillary benefits such as dental or vision?

ICHRAs can be offered alongside ancillary products, but the ICHRA contribution cannot be used to pay the premiums for ancillary products, such as dental or vision.

How long does money stay in an employee's ICHRA account?

ICHRA is a reimbursable arrangement, not an account. The employer keeps the dollars allocated for reimbursement and employees must submit receipts to be reimbursed for their qualified medical expenses.

Employers have the option to either carry over the funds into the next year or reset them at the end of each year.

 

Do employees need to submit receipts for their use of ICHRA funds?

Yes, ICHRAs are reimbursement accounts, so employees must save their premium payment receipts in order to receive reimbursement from ICHRA funds. Some technology vendors are working to simplify this process. Stay tuned for more!

What is the relationship between Advanced Premium Tax Credit (APTC) and ICHRA? Can an employee get both?

An ICHRA benefit is a group benefit offered by an employer to an employee. APTC is a government subsidy offered to consumers based on their household income. Currently, a person cannot receive BOTH an ICHRA benefit and an APTC. With W3LL's decisioning tool, you can make the determination for what dollar amount should be offered to employees to be most beneficial for the employee and fiscally responsible for the employer.

Can an employee get a tax credit if they are using an ICHRA?

Employees participating in an ICHRA cannot collect the premium tax credit (PTC). With an ICHRA, employees have a choice: they can either participate in the HRA and waive their right to premium tax credits, or they can opt-out of the ICHRA and (if qualified) collect their premium tax credits.

Under a group plan, the employees share of premiums are eligible for pre-tax payroll deductions. Assuming the ICHRA funds don't cover all the premium, can employees pay for the balance with pre-tax income?

If the plan is on-exchange, employees cannot use pre-tax payroll deductions to cover the remainder of their premiums. If the plan is off-exchange, however, employees can use the pre-tax payroll deduction to cover premium costs.

Can ICHRA be used for non-insurance reimbursement plans like Christian Ministries, Liberty Retirement Plan, or others?

Unfortunately, ICHRA is only applicable to Qualified Health Plan (QHP) premiums. Other health plans, including Non-Reimbursement Plans, would not qualify.

ICHRA Affordability

Who is responsible for conducting the Affordability Test for each employee that uses an HRA?

The HRA program manager will help you and your employers determine the affordability of the selected benefits. W3LL provides a simple tool for employers to upload their roster and receive a report of which benefits are affordable or not. All the employer needs to provide is the salary, zip code, and family size (optional) for each employee.

If the ICHRA offered to the employee is unaffordable, is the employee eligible for their entire PTC?

Yes, if the ICHRA benefit is deemed unaffordable, the employee has the option to either:

  • Utilize the unaffordable ICHRA benefit with no PTC (premium tax credit).
  • Decline the unaffordable ICHRA benefit and accept up to the full amount of the PTC through the exchange for which they are eligible.

ICHRA Administration

Who helps the employee? Can all this plan changing be that easy?

Yes! With the right technology partner, employees can easily select their ICHRA benefit and enroll in an ACA plan is simple. The employee will answer just a few simple questions to be led down the right path for the best coverage.

What lead time is required to transition to ICHRA?

For employers who have never offered insurance before, employees do not have to be notified 90 days in advance. Instead, it should just be as soon as possible, but preferably 90 days or more. CMS requires this lead time because without sufficient time to research their benefit and shop for a plan, employees might not properly explore all of their options and may enter a situation uninformed of the implications for premium tax credits. If an employer is transitioning from another form of health insurance benefit to an ICHRA, the 90 day notice period is required.

What happens if an employee leaves while they are using ICHRA to purchase their health insurance?

With ICHRA, an employee submits their receipts every month to their employer to have their premium reimbursed. If an employee is no longer with the employer who offered the ICHRA, they will not receive the benefit. However, the employee may choose to keep their ACA health coverage and, if eligible, receive the monthly PTC (premium tax credit).

Who is responsible for monitoring that an employee does not use HRA and government subsidies?

As a part of the enrollment process, employees will be asked if they have been offered an ICHRA and for acknowledging/attesting that if they take the ICHRA, they understand they may not claim the advance premium tax credit (APTC). Accordingly, it is ultimately the responsibility of the employee to confirm/attest if they were offered an ICHRA, what the dollar amount was, and that they will not be claiming the premium tax credit.

Can a broker assist employees in enrolling in ICHRA? What other resources are available?

Yes, the broker can assist employees. W3LL provides its broker partners with resources and information to provide to their employers and their employees to help them transition to ICHRA and make the right decision when selecting a plan.

 

Sounds like there are a lot of compliance requirements. How can an employer manage all of this?

ICHRA administration is easy when you have a great partner, like W3LL! Our solution supports automated compliance and updates. We also manage all the rules and regulation compliance, so you don’t have to:

  • Legal plan document and summary plan document (SPD)
  • Electronic enrollment signatures
  • Verification and HIPAA privacy compliance
  • How to choose an ICHRA administration software solution
  • ERISA compliance
  • Internal and external documentation appeal process
  • Notice requirements
Can administrators operate in states with a state-based marketplace (SBM), or only on the federally facilitated marketplace (FFM)?

HRA program managers and administrators can work in all states. For those who will also be utilizing an enrollment platform, on-exchange enrollments can only go through the FFM.

Employees who live in SBM states will need to go through their state Marketplace. For off-exchange enrollments, any HRA program manager/enrollment administrator who has arrangements with health plans can offer those plans regardless of the state.

For employers with employees in multiple states, the decision tool can be used for all employees, even those not in an FFM state.

Rules & Regulations

Are only ACA qualified plans eligible for ICHRA contributions?

No, any individual plan is qualified for ICHRA use. The employer (or broker) does not get to decide what kinds of plans are made available to an employee. If they want to shop for and enroll in an ACA plan, they are free to do so.

 

Is a one person LLC eligible for an ICHRA benefit?

No, unfortunately not. Sole proprietors and LLCs that are not C-Corps are not eligible for ICHRA benefits.

How does ICHRA satisfy the employer mandate? If an employer offers an unaffordable ICHRA, are they subject to ACA fines?

If the ICHRA offering is deemed unaffordable to the employee, they have options. Employees can either participate in the ICHRA or opt-out and accept the Advanced Premium Tax Credit (APTC) from the Marketplace (if they are eligible). Some Applicable Large Employers (ALE) may be liable for ACA penalties for not providing affordable coverage.

How does ICHRA interact with the large group mandates in the ACA?

The affordability requirements and employer mandate still hold. However, ICHRAs can work with the 11 classes to direct some but not necessarily all employees to shop for individual plans without the employer being penalized for not meeting the requirements of the Employer Mandate.

Can an employee who was offered an ICHRA decline it to receive their APTC?

If the ICHRA benefit is considered unaffordable, the employee may decline it and receive APTC. If the ICHRA benefit is deemed affordable, the employee is not eligible for APTC even if they decline the benefit.

 

What happens if the total medical expense in the month is less than the benefit offered?

An ICHRA is a reimbursement arrangement. If the total benefit of the ICHRA is not used in a given month, the funds roll over to the next month. The employer has the option to configure the ICHRA so that unused funds roll over year to year or reset at the beginning of a new plan year.

Can the money the employee must pay for their premium, above the employer contribution be run through a section 125 plan?

Yes, this is called a "balance of premium plan" or HRA POP. It allows an employee to set aside pre-tax dollars, as they might an FSA or HSA, in an account that can then be routed to the health insurance carrier to pay for the balance of the employee premium not covered by the ICHRA funds. This money does not count toward affordability requirements since it would be coming from the employee's base pay.

Is the ICHRA subject to COBRA?

Yes. The ICHRA is subject to COBRA, but the individual major medical plans and Medicare coverage obtained by employees are not subject to COBRA. However, COBRA does not apply if an employee loses their individual major medical coverage or Medicare coverage during the year (for example, due to non-premium payment). Former employees who continue coverage under the ICHRA by virtue of COBRA must continue to be covered by an individual major medical plan or Medicare plan.

How ICHRA Compares

How does ICHRA compare to QSEHRA for employers with 1-50 employees?

While very similar, there are a few plan details that separate a QSEHRA from an ICHRA. QSHERAs are designed for employees of businesses with fewer than 50 full-time employees, where as ICHRAs have no size restrictions. Another key factor is when offering a QSEHRA, you cannot also have a group insurance policy (including group health, dental, or vision insurance). The ICHRA, however, comes with no such requirements and can be paired with a group policy.

When it comes to allowance amounts, there are caps for QSEHRAs but none for ICHRA. Lastly, a QSEHRA does not prevent employees from accessing premium tax credits however, to prevent double benefits, they must deduct their monthly HRA allowance from their calculated premium tax credits. With an ICHRA, employees cannot collect premium tax credits and participate in the ICHRA. However, if the ICHRA allowance is considered unaffordable, employees may waive the HRA and collect the tax credits (if eligible).

What benefits does ICHRA offer a small employer versus a traditional group plan?

ICHRA offers small employers’ numerous advantages over traditional group plans:

  • Cost Control: group policies typically increase by 5% annually, while ICHRA contributions are solely up to the employer.
  • Flexibility: ability to offer different reimbursement amounts to various employee classes.
  • Participation Requirements: unlike group insurance, there are no participation requirements for ICHRA.
How does the cost of group offerings compare to ICHRA contributions for an employer?

With ICHRA, the employer can set the contribution amount by class, ensuring that the cost will never be more than the cost of a traditional group plan. As for the employees, they can choose to decline the ICHRA contribution if the tax credit is a better option for them.

Partnering With W3LL

Can an employer manage administration of an ICHRA on their own?

While there are no legal requirements preventing an employer from managing an ICHRA on their own, the administrative overhead would likely prove to be overwhelming. HRA managers and TPAs like W3LL can assist in the management of both the ICHRA and employee health insurance shopping.

Do you need a TPA or Administrator for ICHRA?

While a TPA is not necessary to administer an ICHRA, engaging with a partner who meets your needs will reduce the administrative burden for your clients. W3LL offers HRA administration and an employee enrollment platform. Reach out to us and learn more.

How can an employer manage all the different enrollment platforms?

The W3LL platform allows you and your employer to manage your entire book of business - from ICHRA benefit design to employee enrollment in one location.

Does W3LL integrate with Healthcare.gov and the state-based exchanges?

W3LL is a Phase III EDE partner with CMS and has a streamlined, seamless shopping and enrollment process for all FFM (Federally Facilitated Marketplace) states. State-based Marketplaces (SBMs) do not allow for on-exchange integrations; but W3LL supports off-exchange shopping in those states.

How does W3LL help the employee enroll?

Once an employer has decided on the ICHRA benefit being offered to employees, W3LL does the rest. W3LL will send the compliance notice to the employees along with a link to enroll into the health plan of their choice. As long as the employee enrolls through the W3LL platform, the broker will get the credit for the enrollment, and the member is set.

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