Individual Coverage Health Reimbursement Arrangements (ICHRAs) are highly flexible and can easily be customized to suit the needs of your organization through the use of various reimbursement structures and employee classes.
Unlike Qualified Small Employer HRAs (QSEHRAs), ICHRAs have no limits regarding the size of reimbursements, with employers allowed to reimburse as much or as little as they want provided certain fairness guidelines are met. Employers also have control over what kind of expenses are reimbursed and how reimbursements are structured.
- Type(s) of Reimbursement Offered:
Employers can opt to reimburse only premiums, only qualified medical expenses, or both. Qualified medical expenses can include everything from prescriptions to doctor’s visits to dental procedures to medical equipment and more. A complete definition can be found on the IRS website here. An employer who opts to reimburse qualified medical expenses does not need to offer reimbursement for every item on this list – you could choose, for example, to only reimburse prescriptions, though restrictions like this will also be subject to requirements regarding fairness.
- How Reimbursements are Structured:
You can choose whether you want all employees to receive the same amount or whether you want to vary the size of the reimbursement along certain lines. For example, since a health plan for a whole family costs more, you could offer larger reimbursements to employees with families. You can even choose whether you want to offer a set amount to each family or whether you want the amount to vary according to the number of dependents. Individual health plans are also more expensive for older participants, so you can also increase reimbursements according to age. In this case, reimbursements must be structured using a 1:3 ratio from your oldest employee to your youngest, where your oldest employee would be offered a reimbursement three times the size of that offered to the youngest. You can even combine these two structures to have reimbursement based on both age and family size. Whichever structure you choose can be applied to all employees or only members of a certain employee “class”, as discussed below.