The Individual Coverage Health Reimbursement Arrangement (ICHRA) is New in 2020 and It Arguably Couldn’t Have Come at a Better Time

As of January 1, 2020, a new option is available for employers looking to provide coverage for their employees. It comes via the Individual Coverage Health Reimbursement Arrangement (ICHRA), pronounced “ick-ruh.” Over the years, the HRA has evolved into several versions, but none have been as versatile as ICHRA. Up until now, none of the existing HRAs could be used in conjunction with ACA plans. ICHRA changes all that.

About ICHRA:

  • It applies only to employees with qualified* individual plans they have purchased themselves, whether through commercial insurance vendors or those bought on the Exchange at healthcare.gov

  • Employers can design their ICHRA – including things like eligibility and reimbursement limits

  • For those employers previously offering their employees a stipend for their health insurance premiums, ICHRA allows them to continue doing so while sheltering the funds from taxes

  • Employees submit claims for ICHRA reimbursement – these can include health plan premiums and coinsurance

  • Employers reimburse employees for eligible claims through the HRA

  • Adding an ICHRA is an eligible qualified life event, allowing individuals who haven’t purchased coverage the ability to do so outside of the normal open enrollment period

  • ICHRA funds roll over from year to year

  • ICHRA funds are “owned” by the employer and revert back to the business in the event of an employee termination

  • ICHRA can be used to offset Medicare premiums

So, why is the ICHRA option so key now? As we face a global pandemic, it is all the more critical that as many people as possible have health insurance coverage. To the extent that ICHRA drives an uptick in both employer offering of funds for coverage and employee enrollment in individual coverage, it is a net positive for the system.

 *For a plan to be considered qualified, it must meet two requirements - have no annual or lifetime limits and cover preventive health services with no cost sharing.

Steph Passino leads the Market Insight and Consulting Operations at Spring Street Exchange - a services firm that focuses on transformation and social needs related to healthcare. She is an advocate for universal coverage and addressing issues related to social and healthcare access inequity.

 Citations:

  1. What's an Individual Coverage Health Reimbursement Arrangement (HRA)?, Healthcare.gov, https://www.healthcare.gov/ichra/