A cost-effective alternative to group health insurance

ICHRA gives employees greater choice and lowers costs for employers

Many small to medium-sized employers feel that offering traditional group health insurance to their employees is beyond their reach. But one of the few bright spots of 2020 was the implementation of ICHRA, which stands for Individual Coverage Health Reimbursement Arrangement and is a ruling brought down by the Departments of Treasury, Health and Human Services and Labor.

In simplest terms, ICHRA reimburses employees for insurance rather than buying it for them. You define a set reimbursement allowance that is available each month, and your employees are free to choose how they want to use those funds—such as reimbursement for premiums or out-of-pocket expenses like copays and prescription costs.

A customized plan vs. one size fits all

You design your plan by defining which employees are eligible and establishing reimbursement limits by employee groupings (i.e., full time, part time, seasonal, etc.). Reimbursement limits are defined by dollar amount and type: insurance premium only or premiums plus IRS eligible health related expenses.

Your employees purchase the individual plans they want and pay for premiums and other expenses using a benefits debit card. Then they submit claims for reimbursement through our online platform. Once a claim is verified as valid, the funds are deducted from the employer-funded account, and the employer doesn’t need to do any of the administrative work.

Sometimes called a “defined contribution”, ICHRA is different from the one-size-fits all model of group insurance (sometimes called a “defined benefit”) where you choose one plan for the group. Instead, ICHRA gives you greater control over costs and gives your employees the freedom to choose the plan that’s right for them.

Why ICHRA vs. a traditional group insurance policy?

ICHRA puts cost control in your hands and health coverage choice in your employees’ hands. You’ll eliminate claims risk and cost unpredictability. An ICHRA also helps you minimize the administrative burden of managing a group health plan and empowers your employees to choose portable health care coverage that meets their individual needs.

ICHRA helps Applicable Large Employers meet ACA requirements

Any business with 50 or more full-time or full-time equivalent employees is considered an Applicable Large Employer (ALE). The Affordable Care Act (ACA) requires ALEs to offer a minimum level of affordable health insurance coverage to full-time employees and their dependents to avoid paying IRS penalties. An ICHRA can satisfy ACA employer funding and access to health insurance requirements. A Third Party Administrator (TPA) can perform the calculations to determine the minimum you must contribute to each employee’s health insurance premium. The calculation considers your employees’ ability to pay, need, and the cost of insurance.

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Offering health care coverage helps you attract and retain the best employees in your field. An ICHRA is just one of the many solutions we offer that makes those benefits affordable for you and your employees.

VPA ICHRA