ICHRA (Individual Coverage Health Reimbursement Arrangement)
is an employer-sponsored health benefit that allows businesses to provide tax-free reimbursements to employees for individual health insurance premiums and qualified medical expenses. Employers set a monthly contribution amount, and employees choose and pay for a health plan that best meets their needs, receiving reimbursement up to the defined limit.
Benefits
-
For Employers
Cost Control: Employers set a fixed monthly contribution, making budgeting predictable.
Flexibility: Contributions can vary by employee class (e.g., full-time, part-time, seasonal).
Reduced Administrative Burden: No need to manage group health plans.
Tax Advantages: Reimbursements are tax-free for both the employer and employee (if used for qualified expenses).
Attractive Benefit Offering: Helps recruit and retain talent, even for small businesses.
-
For Employees
Personal Choice: Employees select a health plan that fits their individual needs.
Portability: Coverage stays with the employee, even if they change jobs.
Tax-Free Reimbursements: Employees receive reimbursements tax-free when used for eligible expenses.
More Plan Options: Access to ACA-compliant plans, which can include subsidies depending on eligibility (with coordination).