ICHRA Setup and Administration
Interested in establishing an Individual Coverage HRA? Here is a walkthrough of the basic steps and some points to keep in mind along the way.
- Partner with an Administrator
An administrator can walk you through all the ins and outs of creating an ICHRA and provide help with things like setting up a claims process and the mechanisms through which employees will receive their reimbursements. Administrators will also ensure that your program works smoothly and is ERISA- and COBRA-compliant, plus they can help with things like record-keeping and Tax Reporting.
Set a Date
- Can I administrate my own ICHRA? It is technically possible for an employer to administrate their own ICHRA, though doing so is far from easy. One of the main roadblocks is the fact that information about medical expenses and insurance premiums is considered Protected Health Information under the Health Insurance Portability and Accountability Act (HIPAA), and employers are prohibited from requesting this kind of information. A significant amount of record keeping is also involved, and one must pay close attention to ever-changing regulations. Overall, it is recommended that you seek outside assistance rather than trying to handle it yourself.
Next, you will need to choose when you want your ICHRA to go into effect. Because setting up an ICHRA will trigger a 60-day Special Enrollment Period for your employees, there is no need to worry about the start date for your ICHRA coinciding with Open Enrollment for individual health plans.
Create Your Classes
Take a look at your employee population and consider how they could be split into employment-related “classes”, such as full-time employees and part-time employees, salaried employees and non-salaried employees, and so forth. You can decide to offer your ICHRA to all classes or only to some of them. More information on types of classes and the rules surrounding them can be found in our article on ICHRA classes and reimbursement.
Build a Budget
One of the best things about an ICHRA is that you get to decide how much you will offer as reimbursement. Establish an overall budget and decide what types of expenses you want to reimburse and how you will structure these reimbursements. Will you be covering premiums, qualified medical expenses, or both? Will you be offering larger “allowances” to older employees and/or those with families?
Make Legal Plan Documents
This will include a formal plan document and a summary plan document outlining the basics of your plan such as class structure, the size of monthly reimbursements, rules regarding eligibility, and how claims will be processed. Information regarding HIPAA compliance and procedures pertaining to employee privacy should also be included. Note that because an ICHRA counts as a group health plan, these plan documents will be subject to ERISA. If not exempt, you will also need to take COBRA guidelines into account. Many states have state-specific rules regarding COBRA compliance, so be sure to check how things should be handled in your area.
Spread the Word
Once your ICHRA is ready to go, tell your employees! Make sure that they understand the rules for eligibility and how the program works. Since many of them will be unfamiliar with the process of purchasing individual insurance, offer tools, resources, and information on doing that as well. However, it is important to note that federal law prevents employers from being directly involved in an employee’s decision regarding which plan to purchase. Give your employees the knowledge they need to find the plan that’s best for them, but let them reach their own conclusions.