How HRAs work
Health Reimbursement Arrangements are employer-funded accounts that reimburse employees for eligible medical expenses. No employee contributions are allowed. Since an HRA is funded only by the employer, the employer sets the rules of the plan.
The ICHRA works much the same as other HRAs, with the following important differences:
- Reimburses premiums from open market or exchange;
- Available to businesses with any number of employees;
- Participating employees are no longer eligible for a premium tax credit for coverage purchased on an exchange; and,
- Employees may opt out of HRA reimbursements to retain eligibility for premium tax credit.
Traditional group health plans
An employer may not offer an ICHRA and a traditional group health plan (GHP) to employees within the same class. However, an employer may offer an ICHRA to one class of employees and a traditional GHP to another class.
Also, a traditional GHP may be grandfathered for current employees while all new employees as of a stated date (January 1, 2020, or later) are offered only the ICHRA.
Same Terms rule
An ICHRA must be offered on the same terms to all employees within a set class. This refers to the amount of the benefit, rollover rules, and other aspects of the ICHRA plan design for that employee class. An ICHRA allows businesses to set classes of employees according to the following statuses:
- Full-time employees,
- Part-time employees,
- Employees working in the same geographic location (generally, the same insurance rating area, state, or multi-state region),
- Seasonal employees,
- Employees in a unit of employees covered by a particular collective bargaining agreement,
- Employees who have not satisfied a waiting period,
- Non-resident aliens with no U.S.-based income,
- Salaried workers,
- Non-salaried workers (such as hourly workers),
- Temporary employees of staffing firms, or
- Any group of employees formed by combining two or more of these classes.
Your health insurance experts at Total Benefit Solutions, Inc are well versed in HRA’s and ICHRA’s and are here to answer your questions!