This article provides information on what an ICHRA is and addresses common questions and issues associated with this plan type.
An Individual Coverage Health Reimbursement Arrangement (ICHRA) is a health benefit that allows your employer to reimburse you for some or all of your health insurance premiums or other qualified medical expenses. It means that you are responsible for acquiring your own individual coverage, which gives you more control over your health insurance choices and allows you to select coverage that meets your specific needs.
Here's how it works for you:
1. Review and complete the ICHRA Coverage HRA Model Attestations form provided by the employer to opt into the ICHRA.
2. Choose Your Own Health Plan: Shop for and purchase an individual health insurance plan—either through a public exchange (like Healthcare.gov) or directly from an insurance carrier. The plan must meet specific minimum coverage standards.
3. Submit Proof of Coverage: To participate in the ICHRA, employees must provide proof that they have enrolled in a qualifying individual health plan when submitting a claim for reimbursement. Employees must complete and return their attestation form each plan year before enrolling in the ICHRA. Additional documentation may be required such as their premium invoice or proof of payment. Documentation should include the month of coverage and the total amount paid.
4. Receive Reimbursements: Instead of offering a traditional group health plan, the employer provides employees with a monthly allowance. Employees pay their premiums by using the Ameriflex debit card, utilizing the virtual pay feature, or submitting a claim with supporting documentation.
- After your claim is reviewed, you will be reimbursed up to your allotted monthly allowance as determined by the plan setup. For example, if your monthly allowance is $300 and your premium is $350, you submit proof of payment and are reimbursed $300.
Plan Requirements
Your chosen plan must meet the Minimum Essential Coverage (MEC). MEC is a type of health insurance that meets the basic rules set by the government. This includes most major medical plans, such as those purchased through the Healthcare Marketplace (Healthcare.gov), as well as many plans offered by private insurance companies. Minimum Essential Coverage refers to the comprehensiveness of the plan, which must cover essential health benefits, including hospitalization, preventive care, and prescriptions.
Why does MEC matter for ICHRA?
- To use your ICHRA funds, you must be enrolled in a plan that meets the Minimum Essential Coverage (MEC) requirements.
- If you don't have MEC, you can't get reimbursed through your ICHRA for premiums or other expenses.
- Having MEC also helps you avoid a gap in essential health benefits, like preventive care and doctor visits.
How do you know if your plan qualifies?
Most individual health insurance plans do. If you're not sure, you can ask the insurance company.
These plans do not meet MEC standards on their own:
- Short-term limited-duration insurance
- Dental or vision-only plans
- Fixed indemnity plans
- Critical illness or accident-only plans
- Discount plans or health care sharing ministries
ICHRA and Medicare
You can participate in an ICHRA if you're enrolled in Medicare Part A and Part B, or Part C (Medicare Advantage).
Your employer can reimburse your premiums for:
- Medicare Part B
- Medicare Part D
- Medicare Supplement (Medigap) plans
- Medicare Advantage (Part C)
- Other eligible out-of-pocket medical expenses
ICHRA and the Premium Tax Credit:
If you accept the ICHRA and use it to pay for health insurance, you are not eligible to claim a premium tax credit from the Marketplace. The ICHRA and the tax credit can't be combined.
Other Important ICHRA Information
You Can Opt Out of the ICHRA
If the ICHRA offered by your employer is considered unaffordable (based on IRS guidelines), you can decline the ICHRA and apply for a premium tax credit through the Marketplace if you qualify based on your income. You must make your opt-out election before the first day of the plan year.
How Affordability Is Determined
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The ICHRA is considered affordable if the employee's share of the lowest-cost silver plan (after subtracting the ICHRA allowance) is below a certain percentage of their household income (set by the IRS annually).
- For 2025, If the employee's share of the premium (after applying ICHRA funds) is less than or equal to 8.39% of their monthly household income, the ICHRA is considered affordable.
- If it's affordable, you must use the ICHRA and can't get the tax credit.
- If it's not affordable, you can choose to decline the ICHRA and apply for the premium tax credit instead.
ICHRAs and Premium Reimbursement Account (PRM)
A Premium Reimbursement Account (PRM) is a type of pre-tax benefit account that allows employees to set aside their own money to help pay for individual health insurance premiums.
When paired with an Individual Coverage Health Reimbursement Arrangement (ICHRA), which the employer funds, a PRM can help cover any remaining premium costs not fully reimbursed by the ICHRA. Together, these accounts may enable you to cover the full cost of your health insurance premiums through a combination of employer and employee contributions.
Note: A PRM is not automatically included with every ICHRA. Your employer must choose to offer it as an additional benefit.