Understanding ICHRA: Empower Employees through Choice of Health Coverage

by | Oct 2, 2023

ICHRAs are an excellent option for small businesses looking to cover their employees’ benefits. 

The acronym stands for “Individual Coverage Health Reimbursement Arrangements.” It’s pronounced “ICK-RAH.”

These plans allow companies to fund their employees’ health insurance coverage while allowing employees to choose the best plans for themselves or their families, such as one of the affordable options from Elevate Health Plans by Denver Health Medical Plan.

In other words, employees can get support paying for health insurance while staying in charge of what options they choose. 

A Simple and Stable Solution

ICHRAs provide a simple and stable solution to insuring employees as a business. 

Providing health insurance to your employees can be expensive, complex, and difficult for businesses to manage. With ICHRA, businesses of all sizes can offer employees a wider variety of health insurance options to meet individual needs.

ICHRA is an alternative to how you would traditionally offer health insurance to your employees. ICHRAs allow any size company to fund an account for each individual who works for them. The employee can then take that invested account/money and choose a plan directly from the carrier or via Connect for Health Colorado that works best for them.

Benefits include:

  • More financial control and predictability: There is a fixed financial contribution per employee so that you can avoid annual premium increases.
  • There are tax advantages for employers AND employees: Contributions do not count toward employees’ taxable wages, and, in some cases, employees may still qualify for subsidies.
  • There are also tax advantages for part-time and hourly employees, meaning flexible employee contributions allow you to offer unique benefits for employees who aren’t full-time.
  • You will no longer have to endure the stress of picking one plan for your diverse employee base, and this choice will simplify administrative tasks once the ICHRA is set up.
  • Employees choose and “own” their plan, meaning they have the flexibility to choose a plan that works best for their unique situation. 
  • There is no maximum contribution per employee class, meaning you can contribute different amounts to different employee types.

Is ICHRA Right for Your Business?

You might want to consider switching to ICHRA if your business:

  • Currently offers a traditional group health plan but wants to expand options to include more employees and/or reduce costs of a conventional group plan. 
  • Currently do not offer a health plan but want to provide an affordable alternative to employees. 
  • Prefers predictable insurance costs instead of reacting to annual premium increases. 
  • Does not have the time or resources to administer health plans internally. 
  • Would rather have employees pick their health plans than try to select one-size-fits-all for everyone. 
  • Wants to offer health benefits to part-time, seasonal, and hourly employees. 

Setting Up ICHRA for Your Business

Many businesses like ICHRAs because of how straightforward and streamlined the plans are to administer.

You can set up an ICHRA any time of year. Once you do, your employees will have a 60-day special enrollment period during which they can choose a plan.

You can administer your ICHRA on your own using an online platform or have your broker do this. The National Association of Benefits and Insurance Professionals is developing a list of brokers trained on ICHRA plans that we will post as soon as it’s released. Meanwhile, reach out to us at info@peakhealthalliance.org, and we can refer you to those brokers we know are experienced with ICHRAs.

ICHRA costs depend on your reimbursement plans for your employees and how you set them up. As an employer, you control the amount you reimburse your employees, and there is no maximum contribution. However, you need to consider the ACA Affordability guidelines. There is also an ICHRA platform administration fee, which varies depending on your vendor.

Once you have your ICHRA set up, you have options as an employer on how you’ll pay every month.

  • You can pay your employees directly the defined contribution you have allocated.
  • You can have your reimbursement administered through a payroll addition.
  • You can pay the total premium directly to the carrier and make a payroll deduction for your employees. This option is only available on specific ICHRA platforms and is meant to mimic a traditional group plan.

Through ICHRA, Your Employees Can Choose Elevate Health Plans

Peak Health Alliance is excited to partner with Elevate Health Plans by Denver Health Medical Plan to bring affordable, benefit-rich  coverage to nine Colorado counties. Our plans include an extensive local provider network to help people get care without breaking the bank.

If you have questions about ICHRAs or would like more information, please e-mail info@peakhealthalliance.org and note your interest in ICHRAs. We will do our best to connect you with a trained broker or provide further materials.