1. Designing Your ICHRA
First things first, determine your business needs and goals to decide which version of an Individual Coverage Health Reimbursement Arrangement (ICHRA) works best for you and your employees. Partnering with an expert will help guide you through this process and ensure that you are getting the most out of your ICHRA.
Start with Configurations
Capitalize on the flexibility and versatility of an ICHRA by selecting configurations that meet your needs. Talk with internal stakeholders and loop employees into the decision-making process. Common configurations include:
- Allowing Premium Expenses
Decide if employees use the ICHRA contribution for health insurance premium costs. Depending on what your employees need or if the ICHRA is being used alongside a more traditional group plan, you can decide which expenses to reimburse.
- Allowing Qualified Medical Expenses
Going through and deciding which qualified medical expenses will be eligible for reimbursement provides clarity early in the process. Consider the needs and feedback from employees when choosing which expenses qualify.
- Allowing Unused Fund to Roll Over
The ICHRA model can accommodate any budget. Employers can decide if unused contribution funds rollover between plan years or return to the company.
Define ICHRA Classes
Choose from 11 different employee classes that reflect the demographics of your business. Each class can have different contribution limits or benefit offerings. This allows for the flexibility to offer part-time or seasonal employees benefits without breaking the bank.
Restrictions to keep in mind when determining ICHRA classes include:
- Different benefits cannot be offered to two people in the same class.
- Minimum class sizes depend on the overall number of employees and if any groups are being offered a traditional group plan.
Set Contributions Limits
Contributions can be defined by which class the employee falls into. For example, full-time employees can be part of a traditional group plan, part-time employees can receive a contribution of $400, and the Rating Area Class can receive a contribution of $600.
Other factors that you can adjust for personalized contribution limits include the employee’s age and number of dependents. Gathering statistics regarding your employee breakdown and current insurance plan can help you determine the needs of various employees. Those with multiple dependents will require a higher contribution limit to ensure comprehensive coverage.
Create an Employee Roster
Switching to an ICHRA will reduce your company’s administration burden, but you will still have to keep track of information relevant to individual employee coverage. Create a system to keep track and easily update the following information:
- Employees’ General Information
Basic employee information including name, household zip-code, and date of birth.
- Estimated Household Income
Affordability is based on estimated household income. This would include a spouse’s income, but employers typically don’t know this information. Consider using the employee’s salary or gross income.
- Employee’s Dependents
An employee’s dependents will also change the affordability calculation and the ICHRA contribution amount.
- Class Assignments
Each employee is assigned to a class through the roster that will determine contribution limits and benefits.
Review Affordability
Before approving your ICHRA plan and communicating the changes to employees, make sure that the coverage you are offering is Affordable. 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.
Affordability is particularly important to Applicable Large Employers (ALE) who need to offer affordable coverage under the Employer Mandate. Using the benchmark of the lowest-cost silver plan, the annual out-of-pocket cost after the 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%.
2. Providing Notices and Enrollment
Once you have designed your ICHRA to fit the needs of your business, it is time to help your employees make the most of their new coverage. Open communication is key to this step’s success.
Send Employee Notices
Ensure that your employees are notified of the ICHRA offering including a required legal notice 90 days prior to switching to ICHRA. These notices should include all the coverage and reimbursement information you selected during the design phase.
You can include additional information regarding enrolling in a health plan through the ACA Marketplace to ensure that you are helping all your employees enroll in the coverage they need.
Employees Shop and Enroll
The ICHRA model takes the pressure off you to select a health plan that works for all your employees. At this point, all the hard work is behind you. Employees shop for and enroll in individual health insurance plans for themselves and their dependents.
Employees likely have never shopped for individual insurance before ICHRA, so providing information of how to do so before officially switching to an ICHRA will prevent future frustration. Devote resources to support employees during the shopping and enrollment process especially when you first transition.
3. Maintaining Your ICHRA Solution
Now that your ICHRA solution is all set up and your employees can select their plans, you must process reimbursements and maintain employee information.
Facilitate Payments & Reimbursements
There are multiple routes that you can take to process payments & reimbursements without causing a big drain on administrative resources. The following chart outlines everything you and employees need to do to make sure that the ICHRA runs smoothly.
[table id=22 /]Update Employee & Plan Information
An ICHRA is not a stagnant, limited group plan of yesteryear. Make sure you are updating employee information, so they are receiving the right benefits based on their needs. Here are some examples of the information that you need to update:
- Add / Remove Employees
Add a new employee to the roster who will begin receiving an ICHRA Contribution (check if Waiting Period class is in use). Or remove an employee who will no longer be receiving an ICHRA contribution.
- Update Employee Income
Employee income influences the affordability calculations so their pay should be updated and tracked in real time.
- Update Employee Dependents
Add or remove dependents, which will change the contribution and update the affordability calculations.
- Update Classes
Employees who are promoted or transfer positions may need to switch between classes throughout the year.
- Plan Documents & Annual Review
Each year, you can review and update their plan documents and how the ICHRA is designed. This allows for your ICHRA to grow and adapt with your business.
The demand for ICHRA solutions continues to grow, and W3LL is here to help companies with ICHRA setup and management. Connect with us to discuss how our third-party administrative solution can be just the guidance you need to start reaping the ICHRA benefits.
