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Individual Coverage Health Reimbursement Arrangements (ICHRAs) have rapidly become a preferred choice for many employers seeking to provide flexible and cost-efficient health coverage options for their employees. By allowing employees to choose health plans that best meet their needs, ICHRAs offer a personalized approach to health benefits.

Despite their growing popularity, many employers and employees are still unfamiliar with how ICHRAs interact with Advance Premium Tax Credits (APTCs) on the ACA Marketplace.

Flexibility and Choice on the ACA Marketplace

Traditionally, group health plans confine employees to set deductibles, copays, and in-network provider guidelines. In contrast, ICHRAs empower employees to find health plans that fit their specific needs and budgets. Employees can choose plans that cover their preferred providers and necessary medications, purchase the plans directly, and then submit their premiums for reimbursement through the ICHRA.

APTCs are tax credits that help lower monthly insurance premiums for eligible individuals. Eligibility for APTCs is determined by several factors, including projected household income and family size. These tax credits can only be applied to health plans purchased through the ACA Marketplace, making health coverage even more affordable.

The Impact of APTC on Affordability

Large employers, defined as those with more than 50 full-time employees, must comply with the ACA employer mandate. This mandate requires them to offer minimum essential coverage to at least 95% of their full-time employees. In addition, this coverage must be deemed affordable. According to the IRS, for 2024, coverage is considered affordable if an employee’s contribution does not exceed 8.39% of their annual household income.

This affordability calculation is crucial because it determines whether an employee might benefit more from using ICHRA funds or APTCs. In some cases, employees may find that receiving APTCs offer greater cost savings than using ICHRA funds, leading them to opt out of the ICHRA.

It is important to note that employees who opt-in for an ICHRA cannot simultaneously use both ICHRA funds and APTCs.

Why Choose W3LL 

Navigating the complexities of ICHRA and APTC can be challenging, but W3LL’s expertise in ICHRA administration ensures a smooth and compliant process. W3LL helps organizations and employees fully capitalize on the savings and flexibility that ICHRAs offer. From initial setup to ongoing management and support, W3LL provides comprehensive solutions tailored to meet your company’s needs.

Ready to explore how W3LL can support your ICHRA needs? Contact us today to learn more.