Individual Coverage Health and Reimbursement Arrangements (ICHRA)

What is Individual Coverage Health and Reimbursement Arrangements (ICHRA)?

One employer-funded health insurance scheme available in the U.S. is Individual Coverage Health Reimbursement Arrangements (ICHRA). Imparted by the Trump administration in 2019, ICHRAs allow employers to pay for employees’ qualified medical expenses, which include the premiums for the individual health insurance policies purchased on the individual market. Unlike prevailing group health insurance plans, ICHRAs aim to offer more adaptability for both employers and employees. Employers can design ICHRAs for all employees or particular classes of employees, e.g., full-time employees or those from specific job categories. Employees can now use the money from ICHRA to buy a health insurance plan that adequately matches their needs and requirements. This setup has allowed employers to offer healthcare plans, giving employees more incredible options and portability in selecting their healthcare coverage.

Example

One instance of an ICHRA is when a medium-sized business shifts from a conventional employment-based health insurance plan to an ICHRA plan. The firm, XYZ Corp, discovers more and more that the regular group plan she offers is becoming costly and narrows employees' chances. Instead of HSAs, though, they choose ICHRAs to give each employee a fixed sum of money yearly.

Their employee, Emily, does his homework and opts for an individual health insurance plan from the marketplace. She picks a policy that covers her family, such as her husband's drugs and pediatric care for her children. Through the ICHRA's financial support, Emily can cover her premiums and eligible healthcare costs. With this system, Emily can pick a plan that matches their family's needs, and her employer reduces the costs by offering the ICHRA.