ICHRA Guide: Individual Coverage HRAs for Associations
ICHRA probably sounds like just another acronym in a world of alphabet soup. But this is one worth learning. In its simplest form, ICHRAs, or individual coverage health reimbursement arrangements, provide associations and businesses the opportunity to offer employees a monthly allowance of tax-free money to buy health insurance that fits their unique needs. With more support from Individual Coverage HRAs for associations and a little help from Associated Benefits Consulting, your members will be reaping the benefits in no time.
What is an ICHRA?
Serving as alternative employer funding mechanisms to assist in paying for health insurance or health care expenses, health insurance experts believe that ICHRAs have the potential to alter the way employers provide benefits to the United States workforce.
Individual Coverage HRAs were developed by a joint rule between the Internal Revenue Service, the Employee Benefits Security Administration, and the Health and Human Services Department on 06/20/2019 for benefit years beginning in 2020. This rule was the result of Executive Order 13813, which directed the above-named agencies to
“….three areas for improvement in the near term: association health plans (AHPs), short-term, limited-duration insurance (STLDI), and health reimbursement arrangements (HRAs).” With regard to HRAs, the Executive Order directs the Secretaries of the Treasury, Labor, prioritize and HHS to “consider proposing regulations or revising guidance, to the extent permitted by law and supported by sound policy, to increase the usability of HRAs, to expand employers’ ability to offer HRAs to their employees, and to allow HRAs to be used in conjunction with nongroup coverage.” 9DFederal Register
These recent regulations allow employers to offer a tax-advantaged contribution to employees and members, allowing the freedom and flexibility to purchase a health plan that fits their needs. Individual Coverage HRAs enable group health plans for certain employees and ICHRAs for other employees who often are not eligible to participate in an employer’s group health plan, like 1099 contractors. Employers struggling with labor shortages may choose to offer ICHRAs to recruit contract and seasonal workers to supplement their workforce. Employees can also vary ICHRA contributions based on age, family size and geography to aid small groups where age rated premiums can range from $500- $1300.
Previously, employer-sponsored pension plans shifted from defined benefit plans to defined contributions plans. Individual Coverage HRAs present a similar shift to fund eligible expenses via an ICHRA. Eligible expenses are defined in the plan document provided by the employer and depending on the type of ICHRA, examples of other eligible expenses may include:
- Health insurance premiums
- Dental and vision plans
- ACA compliance
- Qualified medical expenses
Benefits of Individual Coverage HRAs for Associations
Since many associations are made up of different size employer groups and industries, ICHRAs remain relevant for members. Employer costs for health insurance benefits were $3.09 per hour worked or 8.0 percent of total compensation in June 2021. (U.S. Bureau of Labor Statistics add graphic from attachment) Addressing issues that are so financially and strategically important to members is important. When it comes to Individual Coverage HRAs for associations, there are three main ways you can help your members.
Bringing current information to members about the existence of Individual Coverage HRAs for associations and its potential applicability for their business will demonstrate your value and support capabilities to members.
Who does an association member turn to if they want to establish an ICHRA? How does a member know they are getting the accurate information? With so many questions surrounding ICHRAs for associations, creating a vetting process for both advisors and vendors saves your members time and money!
New Affinity Offering
As an association that educates and vets products and services related to ICHRAs, the combination membership needs and vetted advisors and vendors may be a natural fit. If so, you can secure additional benefits for your members with packaging advisor services and vendors into an affinity offering specific for members, which may include discounted pricing or other offerings members can’t procure on their own.
Working with your members to secure the best outcome for their businesses through Individual Coverage HRAs for associations will make you a shining star in their eyes. Through educating members, vetting advisors/vendors, and packaging products and services for members in this important and costly area of employee benefits with ICHRAs, your association will be on its way to thriving. For more information about ICHRAs, download this FAQ document from the Departments of Labor, Health and Human Services and the Treasury or contact our team of benefits experts.