An individual coverage health reimbursement arrangement (ICHRA) is a new type of health reimbursement arrangement, available as of 2020, in which employers of any size can reimburse employees for some or all of the premiums that the employees pay for health insurance that they purchase on their own. ICHRAs were created under regulations issued by the Trump administration in 2019.
ICHRAs represent a departure from Obama administration rules that forbid employers from reimbursing employees for individual market premiums. QSEHRAs, which became available in 2017, allow small employers to reimburse employees for individual market premiums. But ICHRAs allow this for employers of any size, and they offer more flexibility in terms of how much an employer is allowed to reimburse an employee.
- Large employers can use an ICHRA to satisfy the employer mandate as long as the ICHRA benefit is substantial enough to make an individual health insurance plan affordable.
- There are no limits on how much an employer can reimburse under an ICHRA.
- An employer cannot offer an employee a choice between a group health plan and an ICHRA; it has to be one or the other. An employer can offer both a group health plan and an ICHRA, but they have to be offered to different classes of employees so that no employee has an option to choose between the group plan and the ICHRA.
- Employees who become eligible for reimbursement of premiums under an ICHRA (or QSEHRA) are eligible for a special enrollment period during which they can enroll in an individual market health plan.
- Employees must be enrolled in an individual market health plan in order to receive the ICHRA benefit. In most cases, this will mean ACA-compliant coverage, but the new rules do allow people with grandmothered and grandfathered plans to utilize an ICHRA benefit if it’s available to them.
- ICHRAs can be used to reimburse qualified medical expenses in addition to individual market health insurance premiums if the employer opts to allow this. But if ICHRA reimbursement is available for pre-deductible expenses, the employee would not be eligible to contribute to an HSA, even if they enroll in an individual market HSA-qualified health plan.