ICHRA – the 2020 solution for giving your employees the healthcare options that they want. Here’s how you can use ICHRA to attract and keep the best staff for your business.
If there is one thing that we have come to understand, it is the importance of healthcare. Now, more than ever before, we have been faced with the reality that having a way to pay for your medical expenses is important. As an employer, having a healthy workforce is key to a successful business. If you can find a way to provide your employees with an affordable option for high-quality healthcare, it benefits your business in the long run.
Individual coverage health reimbursement arrangement (ICHRA) is an innovative way to provide a group healthcare solution to your employees. With ICHRA you can give your employees the peace of mind that they can afford healthcare for themselves and their families. So what is ICHRA, how does it work, and what are the monetary implications of getting it for your workforce?
What is ICHRA?
ICHRA is an account-based solution that allows you to give your employees non-taxed reimbursements for qualified medical expenses. This includes out-of-pocket costs such as copayments and deductibles, as well as monthly premiums. ICHRA can be offered to your employees as an alternative to traditional health insurance. But it must meet the minimum requirements for the minimum value standards and affordability.
Another great benefit of offering ICHRA is that it allows your employees to qualify for tax credits. This is on the condition that your offer doesn’t meet the minimum standards for affordability and they decide to opt-out of ICHRA.
How Exactly Does ICHRA Work?
Essentially, ICHRA reimburses employees for insurance as opposed to buying it for them. This is how it works:
- As the employer, you put together the plan and define which of your employees are eligible. Furthermore, you need to define the reimbursement limits.
- Thereafter, your employees buy the individual plan that they want.
- Your employees then submit their reimbursement claims to you.
- And finally, you reimburse your employees for all claims that are valid.
How Does ICHRA Benefit the Employer and Employee?
Before you opt-in, it is important that you understand why ICHRA is a good option for yourself and for your employees. Here is a list of ways in which you and your employees can benefit from having ICHRA.
How it Benefits Your Employees
- Increased flexibility: The worst part about group plans is that they provide a one-size-fits-all solution. When it comes to healthcare, we all have different needs. ICHRA gives your employees the ability to cater to their own healthcare and prescription needs. This is because ICHRA allows them to make choices that work best for them.
- It goes where you go: With traditional health insurance, your employees usually need to be with your company to access the benefits. So, if they were to decide to branch out on their own, they would no longer qualify. The great thing about ICHRA is that your employees are still able to make use of their chosen plan, even if they no longer work for your company. They just pay the full amount for their bills themselves.
- Not having to sign into a “one-size-fits-all” plan: With traditional insurance, the employer picks one plan and everyone has to sign in for the same “one-size-fits-all” option. With ICHRA, there are many options to choose from and employees get to select something that suits their specific needs.
How it Benefits the Employer
- Having control over costs: Employers have the ability to define the budget benefits and to stick to them. What that means is that employers get to set the reimbursement rates and their costs will not be greater than that. If your employees choose to not use their allowance and opt-in, you get to keep the money. Furthermore, you do not have to deal with surprise annual increases and expensive group plans anymore.
- Designing your own solution: With ICHRA, you are able to design a custom solution for your employees. With traditional insurance, you have to stick to something that is put together by an insurance company. ICHRA has 11 different classes that you can use to divide your employees into benefit levels. Furthermore, you are able to offer different types of solutions to your employees based on them as individuals. So you can offer them solutions based on whether they are part-time or full-time employees, single or family employees, etc.
- Leaving choices up to employees: With traditional insurance, the employer makes all the choices for the employees. With ICHRA, all you have to do is decide which employees qualify, set their allowances and they do the rest. Employees get to make their own choice and you get to focus on the things that matter, like running your business.
With benefits like these that work both for you as the employer and for your employees, it is no wonder that more people are making the switch over to ICHRA. The next thing to consider is how much this is going to cost you and your employees.
What Are the Financial Implications for Your Business and Employees?
One of the best parts about having ICHRA is that, as an employee, you get to decide the portion of the monthly payment that you want to cover. Unlike traditional insurance, there are no minimum or maximum annual contribution requirements. Whatever you decide needs to be affordable both for you and your employees. With ICHRA, affordability matters because it can be the difference between receiving a tax credit or not. So what are the conditions under which something is affordable?
An ICHRA is affordable for your employees if the amount paid on a monthly basis is less than 9.83% of 1/12 of the total household income of the employee. Furthermore, the monthly fee must be cheaper than the lowest costing silver plan that is available on the marketplace.
If the ICHRA is affordable, your employees will not be eligible for the premium tax credit. If the ICHRA that you have on offer is not affordable, then your employees need to decline it. By doing so, they become eligible for the tax credit. It is important to stress that the employee cannot get the ICHRA and still be eligible for the tax credit.
So now that the importance of affordability is clear, you need to know who is eligible for ICHRA within your organization.
Which Employees Are Eligible for ICHRA?
As an employer, you have the choice of offering ICHRA to all your employees or to a select group. If you want to offer it to specific groups, you can do so based on their job descriptions. These are some of the different groups of employees that you could consider:
|Full-time employees||An employee that works a 30 – 40 hour week (based on the business)|
|Part-time employees||An employee that works less than 30 – 40 hours a week|
|Salaried employees||Employees who receive salaries|
|Non-salaried employees||Employees who possibly work on an hourly basis and receive payment accordingly|
|Staffing firm||Employees placed on temporary assignments|
|Rating area||These are employees who work in different geographic locations|
|Waiting period employees||Employees that have recently joined the organization and are waiting for a certain waiting period to elapse|
|Non-resident alien class||Employees that are foreign to the US and do now have a US-based income|
|CBA (Collective Bargaining Agreement) class||Employees who are part of a CBA which defines their work hours, pay rates, and working conditions|
|Seasonal employees||Employees who are given short-term work or hired for a particular season|
|Combination classes||Employees who fit two or more of the criteria listed above|
These are pre-determined classes by the ICHRA rules and you cannot define them yourself. The question then becomes, how does reimbursement work, and how do you manage that as an employer?
Reimbursement Structures Under ICHRA
One of the biggest perks of ICHRA is that there are no limits to how much an employer is allowed to reimburse their employees. You are allowed to reimburse your employees as little or as much as you’d like. The only catch is that it has to be deemed fair to each of the classes. As an employer, you also have the ability to decide which of the following you would like to reimburse:
- Qualified medical expenses only
- Insurance premiums only
- Qualified medical expenses and insurance premiums
Ways to Reimburse your Employees
As an employer, you also have the ability to decide how to structure the reimbursements. Your options are as follows:
- Everyone gets the same amount: You can decide that all of your employees get reimbursed the same amount on a monthly basis.
- Varying based on employee age: On average, individual plans tend to cost more the older your employee is. Therefore, you can decide to reimburse your older employees more than your younger ones. If you select this option, you need to use a 1:3 ratio for reimbursement from youngest to oldest.
- Varying based on family size: Individual plans tend to cost more for employees with bigger families on their plans. This means that you can reimburse employees with bigger families more than those with smaller ones. One of the ways that you could control this is by having a set amount per extra family member on the ICHRA.
- Varying by a combination of age and family size: This one is a combination of the two options above. It is slightly more complicated to calculate, but still doable.
The amount of freedom and choice provided to you as an employer is quite high with ICHRA. This works for both you and your employees because you are allowed to make decisions that ensure that everyone wins. This is different from traditional insurance where all of the decisions are made for you and you are simply required to follow them as they have been set.
Scoop Health: The ICHRA Partner You Have Been Looking For
Despite all of the craziness that has happened in 2020, some good things have come of it. One such thing is the new ICHRA rules which allow employers to get rid of group health insurance and offer more individual choices. ICHRA is the best way to do just that for your employees. By doing this, your employees are now able to choose from a wide range of individual health insurance options. Alternatively, they can select lower-cost medical cost sharing packages.
By selecting ICHRA for your employees with Scoop Health, you are able to provide them with one-on-one care through Virtual MD. They are also entitled to unlimited direct primary care. With ICHRA, employees are also reimbursed for preventative care, as well as vision, dental, and out-of-pocket assistance.
One of the most important things for any business is attracting and retaining the best staff. One of the most effective ways for you to do this is to have an attractive healthcare package for existing and prospective employees. Considering all of the benefits that come with having ICHRA, this would be a good way to make sure that you have the best of the best in your company.
And one of the biggest perks of all is that your employees will pay up to 30% less than they would if you offered them traditional health insurance. So contact us and schedule a free consultation. Let us help guide you through the process of getting ICHRA for your employees today!