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Using ICHRAs for a Class of Employees

Posted on May 7th, 2020

Individual Coverage Health Reimbursement Arrangements (ICHRAs) are new premium reimbursement arrangements that allow employers to reimburse employees for personal health insurance coverage they obtain on their own. Plans such as those offered on the Health Insurance Marketplace or Medicare plans are eligible for reimbursement. An employer may optionally choose to reimburse out-of-pocket medical expenses too. Employers have the freedom to define the expenses that are eligible for reimbursement, and the employer also establishes the maximum reimbursement limits for employees.

Additionally, an employer may offer an ICHRA to its entire workforce or just to a class of its employees; however, an employer may not offer the same class of employees the choice between a traditional group health plan or an ICHRA. Employers may class according to the following categories of employees.

  • Full-time employees
  • Part-time employees
  • Employees working in the same geographic location
  • Seasonal employees
  • Union employees
  • Employees who are in a waiting period before other coverage takes effect
  • Non-resident alien employees with no U.S.-based income
  • Salaried employees
  • Non-salaried employees (e.g. hourly workers)
  • Temporary employees
  • Any group of employees formed by combining 2 or more of these classes

As an example, an employer may offer its full-time employees a traditional group health plan and its part-time employees an ICHRA. Alternatively, an employer with worksite locations in two different states may choose to offer a traditional group health plan to employees in one state and an ICHRA to employees in the other state.

ICHRAs create a great deal of flexibility for employers in terms of cost and coverage, and it allows employers to avoid a “one-size-fits-all” approach of providing health coverage to employees. ICHRAs can be a win-win situation for employers and employees in many scenarios.

To learn more about ICHRAs and the classing rules, please refer to this FAQ.  

 

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