Regulations passed in 2019 permit employers regardless of size to offer an individual coverage Health Reimbursement Arrangement (ICHRA) as an alternative to offering a traditional health insurance plan. The versatility of an ICHRA, employees can utilize pre-tax dollars to purchase health care coverage or pay for qualified medical expenses, such as out-of-pocket costs like deductibles and coinsurance.
Although an ICHRA is available for groups of any size, it’s up to each employer to determine if the ICHRA presents a strategy that will work for their particular circumstances and benefit objectives. Over the first two years of its existence, these programs have become increasingly popular as an alternative to the traditional, direct contribution model.
An employee who elects to participate in an ICHRA offered through their employer must enroll (along with any covered dependents) in either individual health care coverage (through the Marketplace or through a private plan) or in Medicare Parts A (Hospital Insurance), Part B (Medical Insurance) or Part C (Medicare Advantage). Short term plans and limited benefit programs like dental or vision do not fulfill these coverage requirements.
It is necessary that coverage in one of the required programs start by the time the employee’s individual ICHRA begins. And if the employee and any dependents are already enrolled in individual health insurance coverage at the time their ICHRA becomes effective, there’s no need to change that coverage. Likewise, if someone is already enrolled in Medicare Part A, Part B or Part C, their enrollment will satisfy the ICHRA requirement.
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