Understanding the Basics of ICHRA
The Individual Coverage Health Reimbursement Arrangement (ICHRA) is a game-changer in the realm of employer-provided health benefits. Launched in January 2020, ICHRA allows employers of any size to reimburse their employees tax-free for individual health insurance premiums and other medical expenses. This innovative approach gives employees the freedom to choose their insurance plans that best fit their needs, while employers can control costs with set reimbursements. Understanding how ICHRA works is the first step to comprehending what expenses can be reimbursed through this arrangement.
Eligible Insurance Premiums
One of the core benefits of ICHRA is its ability to reimburse employees for their health insurance premiums. These premiums must be for individual health insurance coverage (a Qualified Health Plan) or Medicare parts A, B, C, and D. It's important to note that the insurance plan must meet the minimum essential coverage requirements under the Affordable Care Act (ACA). Employees must provide proof of their insurance coverage, and the policy must be in the name of the employee or their family member to qualify for reimbursement. This setup encourages employees to seek out the best possible coverage options on the market, ensuring they have access to quality healthcare.
ICHRA Interaction With Medicare
To qualify for an ICHRA on Medicare, employees must be enrolled in either:
- Medicare Part A (Hospital Insurance) and Part B (Medical Insurance), or
- Medicare Part C (Medicare Advantage).
Just having Part D (prescription drug coverage) is not sufficient for ICHRA eligibility on its own. Employees must have Medicare parts that provide comprehensive health coverage (Parts A and B or Part C) to use ICHRA funds.
For a refresher on Medicare:
Part A: Provides free hospital insurance, known as "classic Medicare," and is mandatory as a major medical insurance plan.
Part B: Covers 80% of approved doctor visits and outpatient procedures after meeting the annual deductible. Also mandatory as major medical insurance.
Part C (Medicare Advantage): Offers hospital and doctor coinsurance with costs varying by the chosen plan.
Part D: Assists with prescription costs, with pricing based on the selected plan and income. Not classified as major medical insurance or meeting minimum essential coverage standards.
Qualified Medical Expenses Beyond Premiums
ICHRA's flexibility extends beyond just health insurance premiums. It allows for the reimbursement of a broad spectrum of out-of-pocket medical expenses. This includes, but is not limited to, deductibles, copayments, dental and vision care, prescription drugs, and expenses associated with preventive care. The IRS determines the eligibility of these expenses under Section 213(d) of the Internal Revenue Code. This wide-ranging list ensures that employees can get reimbursed for various healthcare needs, making ICHRA a comprehensive health benefit solution.
The inclusion of dental and vision premiums, even for a "premium-only ICHRA" is particularly notable. Often, dental and vision insurance are considered supplemental and might not be covered under traditional employer health plans. ICHRA offering reimbursement for such services is a significant benefit, potentially saving employees hundreds of dollars each year. Similarly, coverage of preventive care expenses under ICHRA underscores the emphasis on maintaining health and wellness, rather than merely providing for medical treatment after health issues arise.
What's Not Covered?
While ICHRA covers a wide range of health-related expenses, it's equally important to understand what it does not cover. Generally, expenses that are not considered necessary for medical care, such as gym memberships or cosmetic surgery, are not eligible for reimbursement. Furthermore, health insurance premiums for plans that do not meet ACA guidelines, or expenses for coverage that begins before the ICHRA plan start date, cannot be reimbursed. This exclusion of non-essential expenses helps maintain the focus of ICHRA on significant health care needs and ensures that the benefits provided are in line with promoting overall health and wellbeing. Generally speaking, any 213(d) expense that would be eligible under an HSA/FSA is also eligible under and ICHRA. Some 213(d) expenses require specific approval or doctor sign-off, and there are services like TrueMed can help you qualify.
Navigating Reimbursement with ICHRA
Generally, the process of getting reimbursed through an ICHRA plan requires some documentation and understanding of the eligible expenses. Employees must submit proof of their medical expenses or insurance premiums to their employer or the ICHRA administrator. This proof often includes receipts, invoices, or insurance billing statements that clearly show the cost and the nature of the expense. Employers then review these submissions to confirm that they are indeed eligible expenses under the ICHRA guidelines before processing the reimbursement.
Another key aspect of managing ICHRA reimbursements is the need for ongoing communication between employers and employees. Employers should provide clear guidance on the types of expenses that are eligible for reimbursement and the documentation required. They should also set expectations regarding the timeline for reimbursement processing. This openness helps prevent misunderstandings and ensures a smooth reimbursement process. To aid in this, many employers leverage third-party administrators (TPAs) who specialize in managing ICHRA plans and can provide expert guidance and support. Leeway simplifies the reimbursement process by providing employees with an ICHRA benefits debit card.
In conclusion, ICHRA offers employers and employees a flexible and cost-effective solution for health care benefits. By understanding what expenses can be reimbursed, both parties can maximize the benefits of this arrangement. From insurance premiums to a wide array of medical out-of-pocket costs, ICHRA covers a substantial portion of healthcare expenses. However, it's crucial to remember the exclusions and ensure that the coverage and expenses meet the specified criteria. As the healthcare landscape continues to evolve, ICHRA stands out as a valuable tool for providing comprehensive health benefits in a personalized and efficient manner.
