Understanding Your Individual Coverage Health Reimbursement Arrangement (ICHRA)
A Simple Guide to How Your Health Benefit Works
Table of Contents
- What is an ICHRA?
- How is an ICHRA Different from Traditional Group Insurance?
- Who Can Participate?
- What Health Insurance Can I Purchase?
- How Does My Employer's Contribution Work?
- What Expenses Can Be Reimbursed?
- Proof of Coverage Requirements
- When Can I Enroll?
- Qualifying Life Events (QLEs)
- Moving to a New State
- Family Status Changes
- COBRA and ICHRA
- Leaving Your Employer
- Frequently Asked Questions
- Common Misunderstandings
1. What is an ICHRA?
ICHRA stands for Individual Coverage Health Reimbursement Arrangement.
Instead of your employer providing one group health insurance plan for everyone, your employer gives you a monthly allowance to help pay for your own individual health insurance.
Think of it this way:
Traditional Insurance
Employer → One group health plan → Employees
ICHRA
Employer → Monthly reimbursement allowance → Employee chooses their own individual health plan
This gives employees more flexibility because everyone can choose a plan that best fits their own doctors, medications, and budget.
2. How is an ICHRA Different from Traditional Group Insurance?
| Traditional Group Plan | ICHRA |
|---|---|
| Employer chooses the insurance plan | Employee chooses the insurance plan |
| Everyone generally has the same options | Employees may choose from many available plans |
| Insurance usually ends when employment ends | The employee owns the policy, but reimbursement generally ends when employment ends unless continued through COBRA |
| Premium is deducted through payroll | Employer reimburses approved premiums or pays according to the employer's plan design |
3. Who Can Participate?
You may be eligible if:
- You are employed by a company offering an ICHRA.
- You are in an employee class that is eligible under your employer's plan.
- You enroll in an eligible individual health insurance plan.
- You maintain that coverage each month.
Your employer determines which employee classes are eligible. Examples include:
- Full-time employees
- Part-time employees
- Seasonal employees
- Salaried employees
- Hourly employees
- Employees in different geographic locations
Not every employee class has to receive the same reimbursement amount.
4. What Health Insurance Can I Purchase?
To participate in an ICHRA, you must have individual health insurance.
Examples include:
- ACA Marketplace (Exchange) plans (Not subsidy eligible and post-tax deductions)
- ACA-compliant Off-Exchange plans purchased directly from an insurance company or licensed broker (Pre-tax deductions)
Generally, these plans qualify:
- HMO
- PPO
- EPO
- POS
Plans that generally do not qualify include:
- Short-term medical plans
- Fixed indemnity plans
- Accident-only coverage
- Critical illness plans
- Hospital indemnity plans
- Health sharing ministries
Medicare may qualify for eligible employees if allowed under the employer's ICHRA.
5. How Does My Employer's Contribution Work?
Each month your employer provides a reimbursement allowance.
Example:
Monthly allowance:
$600
Your insurance premium:
$520
Your employer reimburses up to the amount allowed under the plan.
If your premium exceeds your allowance, you are generally responsible for the remaining amount unless your employer's plan provides otherwise.
Example:
Allowance:
$600
Premium:
$725
Employee pays:
$125
Every employer designs their ICHRA differently, so reimbursement rules can vary.
6. What Expenses Can Be Reimbursed?
Your employer decides what expenses are eligible.
Many employers reimburse only:
- Individual health insurance premiums
Some employers may also reimburse qualified medical expenses allowed under IRS rules, such as:
- Deductibles
- Copays
- Coinsurance
- Prescription medications
- Doctor visits
- Lab work
- Medical equipment
Always check your employer's plan documents to see what expenses are covered.
7. Proof of Coverage Requirements
To receive reimbursements, you must maintain eligible health insurance.
You may need to provide documentation such as:
- Insurance ID card
- Billing statement
- Confirmation of enrollment
- Coverage verification from your insurance company
Many employers require proof that your coverage remains active each month before reimbursements are made.
With SureCo, you only need to be concerned with your payroll deductions as SureCo works in coordination with your employer to make your monthly insurance premiums directly with the carrier.
8. When Can I Enroll?
Most people enroll when:
- First becoming eligible for their employer's ICHRA.
- During the annual Open Enrollment period.
- After experiencing a Qualifying Life Event (QLE) that creates a Special Enrollment Period (SEP).
If you miss your enrollment window and do not have another qualifying event, you may need to wait until the next Open Enrollment period.
9. Qualifying Life Events (QLEs)
A Qualifying Life Event allows you to enroll in or change your individual health insurance outside the annual Open Enrollment period.
Common examples include:
Loss of Coverage
Examples:
- Losing employer-sponsored insurance
- Losing COBRA
- Losing Medicaid
- Losing CHIP
- Aging off a parent's health plan at age 26
- Losing individual coverage due to non-payment (may not qualify)
- Loss of Marketplace coverage due to eligibility changes
Marriage
Getting married allows you and your spouse to enroll in new coverage.
Divorce or Legal Separation
You may qualify to enroll if you lose health coverage because of divorce or legal separation.
Birth, Adoption, or Foster Placement
You may add:
- Newborn children
- Adopted children
- Children placed for adoption
- Foster children when eligible
Coverage can often be effective retroactively, depending on the event and carrier rules.
Death
If the primary policyholder dies and you lose coverage, you may qualify for a Special Enrollment Period.
Permanent Move
Moving may qualify if:
- New plans are available in your new service area.
- Your current plan is no longer available in the new service area.
- You had qualifying health coverage before the move.
- The move is permanent.
Examples include:
- Moving to another state
- Moving to a different county where different health plans are offered
Temporary moves generally do not qualify.
Becoming Newly Eligible for ICHRA
When your employer first offers you an ICHRA or you become newly eligible for it, you generally receive a Special Enrollment Period to enroll in individual health insurance.
Other Possible Qualifying Events
Depending on federal and state rules, additional events may include:
- Release from incarceration
- Gaining lawful immigration status
- Certain Marketplace eligibility determinations
- Court orders requiring coverage for a dependent
10. Moving to a New State
If you permanently move:
- Your current insurance plan may no longer be available.
- Your premium may change.
- Your provider network may change.
- Your employer's reimbursement amount may change if based on your new rating area.
A permanent move that creates a Special Enrollment Period allows you to choose a new individual health plan that is available in your new location.
11. Family Status Changes
Depending on your employer's plan and IRS rules, you may be able to:
- Add your spouse
- Add eligible children
- Remove dependents who become ineligible
- Update your household after marriage, divorce, birth, adoption, or a dependent aging out of coverage
Children can generally remain on an individual health insurance plan until age 26, even if they are married.
12. COBRA and ICHRA
Many employees are familiar with COBRA for traditional group health insurance. COBRA works differently with an ICHRA.
What happens when I leave my job?
Your employer may be required to offer COBRA continuation coverage for the ICHRA if the ICHRA is subject to COBRA rules.
Instead of continuing a group insurance policy, COBRA allows eligible individuals to continue participating in the ICHRA by paying the required COBRA premium, if offered.
If you elect COBRA for the ICHRA:
- You generally continue to receive reimbursements under the same ICHRA terms.
- You are responsible for paying the COBRA premium, which may include the employer's former contribution plus an administrative fee (up to 2% under federal COBRA rules).
- You must continue to maintain eligible individual health insurance.
If you do not elect COBRA:
- Employer reimbursements stop.
- You still own your individual health insurance policy and may keep it by paying the premiums yourself directly to the insurance carrier.
This is an important difference from traditional group insurance. With an ICHRA, the insurance policy is generally owned by you, not your employer.
13. Leaving Your Employer
When employment ends:
- Your employer's reimbursements generally stop unless you elect COBRA (if available).
- Your individual insurance policy does not automatically cancel.
- You may continue the policy by paying the premiums yourself.
- Losing access to the ICHRA may also create opportunities to enroll in other coverage, depending on your circumstances and applicable enrollment rules.
14. Frequently Asked Questions
Do I own my insurance policy?
Yes. Unlike group insurance, the policy is generally issued in your name.
Can I keep my doctor?
That depends on the health plan you choose. Always verify that your doctors and hospitals are in-network before enrolling.
Can I change insurance companies whenever I want?
Usually no. You can generally change plans during:
- Open Enrollment
- A Special Enrollment Period triggered by a Qualifying Life Event
Can my employer tell me which insurance company to choose?
No. Employers cannot require you to enroll with a specific insurance carrier if they are offering an ICHRA. The choice is yours, provided the coverage is eligible under the ICHRA.
Can I receive Marketplace premium tax credits?
Generally, if your employer offers an affordable ICHRA, you are not eligible for premium tax credits for the months the affordable ICHRA is available. If the ICHRA is considered unaffordable under IRS rules, different options may be available. Eligibility depends on several factors, including affordability calculations and whether you opt out of the ICHRA.
What happens if I stop paying my insurance premium?
If your individual health insurance is terminated, your employer will generally stop reimbursing you because you are no longer enrolled in eligible coverage.
15. Common Misunderstandings
My employer picked my insurance company.
No. Under an ICHRA, you choose your own eligible individual health insurance plan.
I lose my insurance when I leave my job.
Not necessarily. Your employer's reimbursements usually end, but your individual policy is yours to keep if you continue paying the premium.
I can change plans any time.
Generally, no. Plan changes are usually limited to Open Enrollment or a Special Enrollment Period triggered by a Qualifying Life Event.
Every medical expense is automatically reimbursed.
No. Your employer decides which expenses are eligible for reimbursement under the ICHRA.
COBRA continues my insurance policy.
Not exactly. COBRA for an ICHRA generally allows eligible individuals to continue participation in the reimbursement arrangement—not a group insurance policy—while you continue to maintain your own eligible individual coverage.
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