Part of what attracted you to the Individual Coverage Health Reimbursement Arrangement, or the ICHRA (pronounced ick-rah,) included the flexibility and control the coverage model offers. Not only can you determine affordable reimbursement limits for your participating employees, but you can manage and better control the costs of the reimbursements.
And your staff sees benefits, too. For example, the ICHRA reimbursement platform allows your employees to choose their own plans based on individual needs and budgets. The payments then funnel back to their pockets to cover actual out-of-pocket costs incurred.
It really is a health insurance coverage win-win situation for both sides.
But now that you’re on board, you’re looking to develop a strategy and plan for how you implement those ICHRA reimbursements. And you have options there, too. So today, we’ll share a complete guide to reimbursement choices you have so that you can make the best decision for your employees and your company’s bottom line.
It’s important to understand the terms and process before diving into the various roles, responsibilities, advantages, and disadvantages of each type of ICHRA reimbursement method.
For example, the ICHRA expense submission process, regardless of how you structure your platform, usually begins when a participating employee submits a receipt. Based on how you define your employee classes and contribution definitions, you can then review the expense to verify if it’s a Qualified Medical Expense (QME). After that, subsequent payments are made, and maintenance is performed ongoing.
Keeping this timeline process in mind, you can now consider just how you want to introduce those ICHRA reimbursements. Of course, how you choose to authorize those payments for ICHRA payments can be one of the following methods. Again, what works best for your business might be determined by your available time to process, digital resources at your disposal, and existing payroll platforms.
Traditional Methods of Payment
In many cases, a more traditional method of ICHRA reimbursement makes sense. This process allows for manual review and processing and can often help keep these payments separate from other internal operations.
Employer Responsibility
In a traditional model for ICHRA reimbursement, the employer is responsible for reviewing employee submitted receipts for approval. Additionally, as the employer, you’ll then process and pay the reimbursement.
Employee Responsibility
As an employee under the traditional ICHRA reimbursement, the responsibilities include paying for health insurance coverage directly and submitting receipts for those health-related out-of-pocket costs for reimbursement consideration.
Advantages of Traditional Payment
Some advantages of this more traditional payment method include no need for robust technology. ICHRA reimbursements can be managed, submitted, and paid entirely with old-school paper and spreadsheet tracking.
Disadvantages of Traditional Payment
Challenges represent much of the same. Without technology requirements, the process for reimbursements becomes manual, thus labor-intensive for the employee or department you have charged with processing these receipt requests. Growing your company will only make it harder to keep up with reimbursements. And any tax advantages become deferred, as well.
Debit Card Methods of Payment
When it comes to reimbursements, you might decide to go with the debit card method. This is handy for both employees and employers in managing ongoing payments.
Employer Responsibility
In the scenario when debit cards are used for reimbursements, employers are responsible for providing the cards themselves. Reloading payments based on class, dependents, and age is also the responsibility of the employer.
Employee Responsibility
On the employee side, participating staff members are responsible for using the debit card to pay for those out-of-pocket medical expenses and health insurance premiums. Any non-qualifying reimbursements are the burden of the employee to pay, as well.
Advantages of Debit Card Payments
Advantages include the digital upgrade from the traditional methods of payment. ICHRA reimbursements can be authorized online, making for less manual review. Additionally, employees don’t pay out-of-pocket costs for the full premium amounts.
Disadvantages of Debit Card Payments
Disadvantages to using the debit card method for ICHRA reimbursement include a more limited control over the transactions used with the cards. Tax advantages are also deferred, as with traditional payment methods.
Payroll Method of Payment
If digital efficiencies and time-saving processes are what you had in mind, your ideal ICHRA reimbursement model might involve payroll methods of payment.
Employer Responsibility
As the employer, you can manage your roster and contribution amount entirely. Your responsibility will also include reviewing and approving qualified medical expenses for reimbursement.
Employee Responsibility
At the employee level, each participating staff member is responsible for handling health insurance enrollment in a chosen plan. And once they’ve paid for a health-related expense incurred, they’ll be responsible for submitting receipts for those out-of-pocket expenses.
Advantages of Payroll-Integrated Payment
Advantages of the payroll ICHRA reimbursement model include the obvious streamlining of payments funneling through your payroll or HRIS. Tax advantages can be realized in real-time, as well. And overall, this method tends to be much easier and cohesive to manage.
Disadvantages of Payroll-Integrated Payment
Disadvantages for choosing this model of ICHRA payment aren’t really significant unless you don’t have an HRIS or payroll system to integrate payments with in the first place. And as the company provider, you’ll still need to review submissions to verify qualified medical expenses.
When you decide to process these ICHRA reimbursements will be another consideration. Some companies choose to authorize payments in unison with traditional employee expense reimbursements. Others opt for the month processing timeline or with company wide payroll.
And you’ll also need to develop a plan for adopting new hires and onboarding based on the employee class definitions you choose. Finally, deciding how you enact ICHRA reimbursements may be determined based on your company’s current growth and hiring, especially if you need a quick and efficient method for payments.
As always, when you need ICHRA help, from setup to implementation, W3LL is here to help. Having an ICHRA model that allows your business to adhere to budgets, you can give employees the control they need to manage and control their household budgets. And they get to customize health insurance coverage to meet their needs. Just don’t forget that W3LL is here to support you as you support your teams. So contact our W3LL team of professionals today!
