Spells Employer Healthcare Plan Voucher
An ICHRA (Individual Coverage HRA) allows all businesses, regardless of size, to reimburse or facilitate payment on behalf of employees at a set level for their health insurance, as well as other qualified health care expenses. ICHRAs are also tax-advantaged, exempt from both payroll taxes and income taxes.
Regardless of who fills the last two seats in the U.S. Senate, or even who resides at 1600 Pennsylvania Avenue beyond January 20, there is an employer health benefit tax regulation that should transcend political bickering.
As it now stands and figures to remain, employers can satisfy the Affordable Care Act (ACA) requirements and receive the tax benefit associated with group healthcare premiums by funding an ICHRA. These accounts, the full title of which is Individual Coverage Health Reimbursement Account, were created through a Donald Trump executive order, but have roots in a Joe Biden supported legislation in 2016.
Here’s how an ICRHRA works.
Employers can create an employee allowance, a voucher of sorts, equal to at least 9.78 percent of the employee’s income – tax-free to each -- and direct employees to the ACA Marketplace, Healthcare.gov or an individual plan from a private exchange that offers ACA-compliant plans. The employees can select a plan, and pay for it with the voucher. It’s definitely a win-win situation, the employer doesn’t have to select group plans that will satisfy the diverse health requirements of their employees, and the employee can select a plan that matches their needs more closely.
In a November 30 Benefits Pro article[i], Jack Hooper, CEO of Take Command Health, called this “the bipartisan health policy that no one talks about.” Hooper pointed out that as vice president, Joe Biden in 2016 supported legislation that birthed QSEHRA, predecessor to ICHRA. President Donald Trump expanded upon the legislation in 2018. ICHRA became available January 1, 2020.
“There’s plenty of room to the left and the right of center for ICHRA to thrive, which explains why, despite their many differences, two administrations and two political ideologies can agree on something,” Hooper wrote.Expenses eligible for reimbursement through ICHRA include individual health insurance premiums along with Medicare Parts A through D premiums and Medicare Supplements. Specific medical expenses eligible for reimbursement are those specified 213(d) listed in IRS Publication 502[ii]. While employers can offer a group plan in addition to ICHRA, they can offer only one or the other to each specific category of employee, which are determined at the common-law employer level.
The Healthcare Exchange is gaining in popularity since rates for 2021 fell for the third straight year, down 2 percent over 2020. The benchmark plan premium shows a drop of 8 percent since 2018. Thirty additional issuers are offering coverage in 2021, a rise to 181 which leaves just 10 percent of counties with only one participating insurer[iii].
To cost compare group plans to what’s available on the Exchange, Vericred has posted an interactive map[iv]. Rolling your mouse over the map will produce an overlay of small group plan cost versus individual coverage available in the county over which your mouse hovers. The prices indicated will be based upon either of two age selections (27 or 50) and if the plan level is bronze, silver or gold.
A Growing Opportunity
ICHRAs are a growing opportunity according to US Departments of Health & Human Services, Labor and Treasury estimates, between 2020-2029 approximately:
- 7 million people will shift from group to individual coverage
- 800,000 employers will offer an ICHRA
- 11.4 million employees and family members will purchase insurance coverage using funds from an ICHRA
- 800,000 of the 11.4M will be newly covered.
- 20-30% increase of ICHRAs over the next 10 years
OptiMed can provide the guidance needed in setting up ICHRA for groups of any size, and efficiently manage the plan. Download both PDF documents linked below to learn more or contact the sales representative whose email directed you to this blog post.
You can probably identify numerous groups for which an ICHRA arrangement is worth considering, thankful it’s likely to escape any political turmoil.
“We think the ICHRA model could be the key to bipartisan success,“ Hooper wrote. “It delivers more lives to the individual market which is important to Democrats, and provides consumer choice and flexibility that Republicans insist on.”