In 2019, the federal government established individual coverage health reimbursement arrangements (ICHRAs), an alternative model that employers could use to offer their employees health insurance coverage.

With this health insurance model, employers can gain flexibility and cost savings, while offering their employees the same. Employers get to choose how much they want to reimburse their employees for their out-of-pocket expenses, including premiums, copays and more.

Employees purchase health insurance on their own, through federal- or state-funded health exchanges or other means, and use the reimbursements to offset their costs.

Many companies today are finding ICHRAs to be a win-win for them and their employees.

If you are considering making a similar switch, there are some things you should know. We’ll cover ICHRA compliance 101 in this article so you don’t make major mistakes before implementing your ICHRA plan.

You Must Provide Formal Documentation

ICHRA rules require that employers must provide their employees with official Initial Notice that they’ll be able to participate in the plan. This notice must be delivered in writing 90 days prior to the plan year beginning.

In the notice, you have to include who is eligible to participate, the contribution amounts the employer is providing as well as how having an ICHRA might affect premium tax credits offered on the health marketplace exchanges.

Once the plan is in place, you must define it with a formal document. Employers are required to provide detailed explanations of the plan as well as an SPD, or summary plan document.

All new enrollees must be given this SPD within 90 days, and all eligible employees have to be provided it within 120 days after you form the ICHRA.

You Must Verify Individual Coverage

To participate in an ICHRA, employees must have an individual health insurance plan. These can be obtained through health insurance marketplaces or elsewhere, and even Medicare Parts A, B and C qualify.

Before an employer is able to distribute contributions to their employees, the employees must prove they have an individual policy. The employer, then, has to verify that the coverage qualifies before they can distribute any reimbursements.

You Must Set Up Employee Classes Properly

A major advantage of ICHRAs is the ability to set up different employee classes and offer different reimbursement amounts based on these classes. For instance, you might set up one class for your full-time employees and one for part-time or seasonal workers, and then offer different reimbursement amounts to each.

This can serve as a great recruitment tool for your company, as you can offer some level of coverage to all employees — even those who might not qualify if you offered a traditional health plan.

There are 11 different classes that you can choose from in an ICHRA, so understanding what these are is very important. If you don’t define your classes properly, you could find yourself out of compliance.

You Must Set Up Proper Documentation for Reporting

Even though ICHRAs are technically self-funded plans, there are still reporting requirements employers must adhere to. Employers have to track enrollments in the plan, waivers and opt outs, as well as the amounts of the reimbursements.

Under the Affordable Care Act, ICHRA administrators have to complete official forms such as the 1094-C and 1095-C, and enter in the codes that are specific for ICHRAs.

Along these lines, it’s also important to ensure that your ICHRA adheres to the ACA requirement if you’re an applicable large employer, or ALE. Companies that have at least 50 full-time equivalent employees have to offer coverage to at least 95% of these full-time employees.

You also must clearly define your employee classifications — as mentioned above — and consistently apply rules to them throughout your company.

Manage Your ICHRA Compliance with Beckham Ellis Insurance Group

ICHRAs provide employers today with many advantages of traditional group health insurance plans. In addition to the cost savings and cost certainty, they also provide a lot of flexibility and choice to employees.

Still, there are many legal requirements under the ACA that all companies offering ICHRAs must adhere to. These legal and reporting requirements can be tough for companies to understand, especially if they’ve never done it before.

At Beckham Ellis Insurance Group, we have insurance professionals who have years of experience in crafting company benefits plans and ensuring full compliance. We can help your company get your ICHRA plan off the ground up to all regulatory standards, and ensure that you’re always in compliance.

If your business is in the South Carolina or Georgia region, contact us today to find out how we can help.