Traditionally, businesses offer only full-time employees a comprehensive benefits package that includes medical insurance. The biggest reason for this, of course, is that allowing seasonal or part-time workers to a health plan can be quite expensive for businesses.

As the landscape of work has changed dramatically in the last few years, though, more businesses have added part-time or seasonal workers to help supplement their full-time workforce. More workers, too, have preferred to take on these non-full-time positions, often cobbling together multiple jobs with smaller time commitments to create a career that works best for them and their schedule.

Seemingly in response to this changing landscape, a new offering has become available to businesses that allows them to extend health benefits to more employees, which helps them attract and retain the talent they need without spending more than their budget allows.

These plans are called ICHAs, or individual coverage health reimbursement arrangements. Here’s how they work.

What Is an ICHRA Plan?

ICHRA plans are a way for employers to reimburse their employees for premiums they pay for health insurance plans as well as for some qualified medical expenses. These reimbursements are done with pre-tax dollars, which is most beneficial to the employees.

These plans were first offered in 2020, overriding a previous Affordable Care Act prohibition on employers reimbursing their workers for market premiums they paid.

One of the nice things about ICHRA plans is that any business can offer them, regardless of its size. Applicable large employers, known as ALEs, might also be able to satisfy their ACA employer mandate through ICHRA plans depending on the size of the reimbursements.

Only employees who aren’t offered a group health insurance plan through their employer can take advantage of an ICHRA. However, employers are allowed to offer both a traditional group plan and an ICHRA plan.

They just have to offer different plans to different employee “classes.” For instance, they can offer the group health plan to full-time employees and the ICHRA plan to everyone else.

How Do ICHRA Plans Work?

Employers have the power to decide the reimbursement amount they’ll offer employees through the ICHRA plan, though they must offer identical terms to all employees in a specific class. There are exceptions to this where employers are allowed to increase the reimbursements for employees who have more dependents or are older.

Just like with a traditional group health insurance plan, the employer must provide adequate notice, in writing, to employees about the availability of the ICHRA plan.

Employees who wish to participate will actually obtain health insurance from a provider directly, such as through the federal ACA marketplace or their state’s equivalent. They might then be required to submit proof to the employer that they, and their dependents, are covered under a qualified plan to be eligible.

If the reimbursement amount offered by the employer doesn’t pay for the full cost of the monthly premium, employees have the option of having salary reductions made pre-tax through what’s known as a cafeteria plan to cover whatever is remaining. This option is only available to people who purchase their health insurance plan not through the ACA marketplace.

What Advantages to ICHRAs Provide?

From the employer’s perspective, ICHRA plans can serve as another tool for attracting and retaining top talent in a competitive job market. Employees today don’t just value a competitive salary when they search for a job, making it imperative for employers to offer a comprehensive benefits package that includes health insurance.

With ICHRA plans, employers are now able to offer more classes of employees the health coverage they need through reimbursements, which helps them build more impressive teams without breaking the bank.

Not only that, but ICHRA plans could be good options for businesses that don’t offer traditional group health insurance plans because they’re too expensive. These plans are a way for businesses to remain competitive in the job marketplace.

Are There Any Downsides to ICHRA Plans?

The biggest potential downside to ICHRA plans is that they can be complicated.

Unlike traditional group health insurance plans that employers offer, employees must find and secure their own individual health insurance. In doing so, they must ensure that the plan meets certain criteria to qualify for the reimbursements under the ICHRA.

For some employees, the only affordable individual health insurance options are through the ACA marketplace, and it just so happens that those plans typically don’t qualify for ICHRA reimbursements.

Offer the Best Employee Benefits with Beckham Insurance Group

With health-care expenses and the cost of health insurance increasing seemingly every year, employers often search for ways to reduce their costs. Cutting back on benefits offerings is usually not a good idea, though, regardless of the cost savings it brings, because doing so puts a business at a competitive disadvantage when it comes to attracting and retaining top talent.

Today, businesses have another option, known as the ICHRA plan, they can offer as an alternative or supplement to traditional group health care plans. But, is an ICHRA right for your business?

At Beckham Insurance Group, we can help you decide whether an ICHRA plan might be right for your business, or whether there’s another option that could save you money while still helping you remain competitive.

If you’re in the South Carolina or Georgia region, contact us today to speak with one of our experienced benefits specialist, and let us help you offer the best benefits package for your employees at the best cost.