What employers need to know about ICHRA administration

As of January 1, 2020, employers can offer employees an Individual Coverage Health Reimbursement Arrangement (ICHRA) instead of offering a traditional job-based health plan. This type of HRA is an alternative to traditional group health plan coverage. Rather than provide a group health plan to employees, employees purchase their own individual or family health insurance through an ICHRA. The employer then reimburses valid medical expenses, such as monthly premiums and, perhaps, coinsurance and deductibles, up to the plan allowance. Check out our other resources to learn more about what an ICHRA is.

ICHRA Administration Step 1:  how to set up an ICHRA plan for your employees

If you are going to offer your employees an ICHRA plan, you have some preliminary decisions to make and activities to undertake.

What will be your ICHRA plan’s effective date?

While many group health plans’ benefit year coincide with the start of the calendar year or the Company’s fiscal year, ICHRA plans can start on any date. This flexibility is possible because the ICHRA plan offering triggers a special enrollment period for employees, permitting them to purchase an ACA-compliant individual/family health policy on the state exchange (also referred to as marketplace plans) outside the annual open enrollment period.

Will the ICHRA plan replace an existing group health plan or QSEHRA or will the group health plan continue to be offered to some employees?

Keep in mind if your business is an S corporation or Sole Proprietorship, the business owner can’t participate in an ICHRA; nor can employees who have coverage under their spouse or partner’s employer’s group plan.

Will your ICHRA plan have classes of employees?

One of the attractive features of the ICHRA plan is the flexibility it offers employers to segment their workforce into up to eleven classes. Employers can opt to offer an ICHRA to all employees, only to certain classes and not offer a benefit to certain classes, or only to certain classes and offer a traditional group benefit to certain classes. You can also offer different benefits to each class you designate. The class types are:

• Full-time employees
• Part-time employees
• Seasonal employees
• Salaried employees
• Non-salaried employees (such as hourly)
• Employees covered by a particular collective bargaining arrangement
• Employees who have not satisfied a waiting period
• Temporary employees of staffing firms
• Non-resident aliens with no U.S.-based income
• Employees working in the same geographic area
• Any combination of two or more of the above

Will you hire a third party to serve as the ICHRA plan administrator or perform ICHRA administration in-house?

ICHRA plan administration involves more than reimbursing employees when they submit eligible expenses. There are important procedural, recordkeeping, and reporting requirements associated with ICHRA administration required by law. You will need to consider the ICHRA administration cost associated with in-house administration and consultant support compared to the cost of hiring a third party as ICHRA plan administrator. Third party administration is likely to be the more cost and resource efficient path.

These decisions involve complex issues. eHealth can help you navigate these complex issues and come to decisions that align with your intentions.

Key actions to setting up an ICHRA plan

1. You will need to design classes for eligible employees based on the benefits you want to offer them.
2. You will need to set a budget and set the contribution allowances. In determining the budget, you will determine the monthly contribution per employee for health insurance premiums reimbursement. Keep in mind:
   • There are no restrictions on the amount that can be contributed to each employee;
   • Different contribution allowances can be set for different employee classes;
   • Different contribution allowances can be set based on employee age and family size.
3. You will need to prepare a Plan Document and Summary Plan Description, which provide a formal description of the ICHRA plan that must comply with ERISA and IRS requirements, including but not limited to the terms and conditions for the ICHRA, monthly reimbursement amounts, class structures, claims processes, reimbursement, eligibility, appeals processes and rights, and federally required information on HIPAA and other privacy issues as well as disclosure of the ICHRA plan administrator and plan fiduciaries and their duties, and a plan termination provision.
4. You will need to prepare employee communications and resources that explain the ICHRA and how it works. Written notices must be provided to employees at least 90 days prior to the effective date of the ICHRA. The ICHRA administrator should be available to present informational meetings and provide individualized help to employees with questions about the ICHRA plan.

ICHRA Administration Step 2: each employee selects a health insurance plan and is reimbursed

ICHRA plan benefits are available to employees only if they enroll in an individual health plan, which typically provides the option of family coverage. Your employees need to understand what individual health insurance plans work with an ICHRA plan (e.g., ACA-compliant plans, Medicare Part A, Part B, and Part C), and how to find them. eHealth can help employees find the right individual health insurance plan to meet their needs and eHealth’s licensed agents and brokers can answer questions they may have about plans’ benefits and cost.

ICHRA Administration Step 3: Ongoing procedures for managing your ICHRA plan

You, or your third party ICHRA administrator if you hire one, have important duties to perform on an ongoing basis to manage the ICHRA plan. Furthermore, these tasks must be performed according to the strict rules of ERISA (applicable to private businesses in almost all cases) and IRS.

• Update your ICHRA Plan membership record to reflect current plan participants. This means new employees and employees terminating employment must be identified and dates verified.
  • New employees must be notified of the ICHRA benefit and provided documents explaining the benefit and how to shop and purchase individual health insurance.
  • Employees have left employment, must be terminated from the ICHRA plan and any outstanding claims reviewed, and validated, paid promptly.

• Receive, review, and validate claims for reimbursement.
  • Process reimbursements for valid claims
  • Notify employee in writing of denied requests for reimbursement, including the reason for the denial, and the employee’s appeal rights.

• Distribute notices about the ICHRA plan to participants, including Privacy Notices that explain how employees’ personal health information is protected and secure and forthcoming changes in the plan.

•  Prepare tax reports.

• Maintain and store plan-related records in a secure manner for a minimum of 7 years.
• Review ICHRA plan allowances at least annually for each class and budget adjustments, as needed.

eHealth can help you assess ICHRA administration costs and compare third party ICHRA administrator services and costs. Our licensed agents and benefit specialists can help you find the right solution for your business needs. To get started, visit our Small Business Health Insurance page. Simply click on the button “Get Quotes” and check the box on the contact form indicating you are interested in discussing ICHRA as a health benefits option for your business.