Setting Up an ICHRA: Step-by-Step
1. Pick a Start Date
An ICHRA can start on any date. Most people think calendar year when they think of benefits or changes to benefits. But when a group decides to start an ICHRA, it triggers a special enrollment period (SEP). This SEP can start at any time and allows employees to find their plans on the individual market. If they are starting the ICHRA in conjunction with canceling a group plan, start the ICHRA the day after the cancellation takes effect.
Special Enrollment Period
Generally, individuals enroll in or change their individual health insurance coverage during the annual Open Enrollment which runs from November 1 to December 15. To purchase a plan outside of Open Enrollment, individuals need a qualifying life event (e.g. marriage, divorce, job change, moving, or having a baby) to trigger a Special Enrollment Period.
Employers offering an ICHRA will trigger a Special Enrollment Period for employees, providing employees 60 days to purchase qualified health insurance coverage. The triggering event is the first date the employee is able to participate in the ICHRA. Because of this, employers may set up an ICHRA any time during the year.
2. Design Classes for Eligible Employees
One of the features of ICHRAs is how flexible they can be when designing the program to fit the needs of employees. One of those flexibility points of an ICHRA is an employer can offer different plans based on 11 different classes of employees. This can tailor the benefits to each class. The class types are:
- Full-time employees*
- Part-time employees*
- Seasonal employees
- Salaried employees*
- Non-salaried employees (such as hourly)*
- Employees covered by a particular collective bargaining arrangement (different bargaining units can be separate classes)
- Employees who have not satisfied a waiting period
- Temporary employees of staffing firms
- Non-resident aliens with no U.S.-based income
- Employees working in the same insurance rating area* (i.e., the same geographic location such as state or multi-state region)
- Any combination of two or more of the above
*Subject to class size minimums if offered a group health plan
Employers can opt to offer an ICHRA to:
- all employees,
- only to certain classes and not offer a benefit to certain classes, or
- only to certain classes and offer a traditional group benefit to certain classes.
3. Determine Budget and Set Contribution Allowance
Next, employers determine their annual budget. They determine the monthly contribution per employee for health insurance premiums reimbursement. These amounts should be set with the following in mind:
- There are no restrictions on the amount that can be contributed to each employee, there is no minimum or maximum.
- Different contribution allowances may be offered to different employee classes.
- The different contributions may be offered to an employee based on age and family size.
4. Provide Legal Plan Documents
Both the Internal Revenue Code and ERISA require an employer to have a formal written plan document. A Summary Plan Description (SPD) is also required by ERISA. These are legal documents that cover a large amount of information. They are required to include the terms and conditions for the ICHRA, including monthly reimbursement amounts, class structures, claims processes, reimbursement eligibility, and federally required information on HIPAA and other privacy issues. These documents should be taken seriously as there are significant consequences if they are not created and distributed properly.
5. Communicate and Provide Resources to Employees
Employees must be notified 90 days in advance of an ICHRA start date. This notification must include information on the ICHRA and benefit eligibility. Since this may be the first time that an employee is experiencing an ICHRA, the employer should provide guidance on the new plan.
The triggering event is the first date employees can participate in the ICHRA. As noted above, employers may set up an ICHRA any time during the year. If the employer is subject to ERISA they should take care not to directly or indirectly influence employees when they are selecting an insurance plan. They should not endorse any insurance company or coverage.
Employee Communication Best Practices
Be clear an ICHRA is being offered and outline the benefits
Get the word out; socialize the ICHRA around the office – from posters to lunch-n-learns to direct communications from leaders, and beyond
Anticipate questions, prepare your answers
Craft a welcome letter customized for each individual
Engage an administrator to help guide employees through the enrollment process and answer questions along the way
Hello Trovia and Hello Simple
Trovia, an ICHRA-solution powered by Nexben, makes adopting an ICHRA simple.
Our technology platform puts the employer in control of the ICHRA. They will have to administer the plan. Trovia makes it easy by giving them the tools they need to run the plan efficiently.
When employees need to sign up for a plan, we give them access to all the plans available in their area. We also give them the tools to sift through those plans and find the one that best fits their needs.
Then, when has made their selections and the employee contributions are payroll deducted on a pre-tax basis, Trovia helps to route the payments from the employer to the carrier.
How to switch my group from a QSEHRA to an ICHRA?
If the employer has an established Qualified Small Employer HRA (QSEHRA), they may be looking at transitioning to an ICHRA. It may be a good move, but how do they know? Try asking them a few questions:
- Are they looking to expand their contributions to their employees’ health insurance costs beyond what QSEHRA allows?
QSEHRAs allow a maximum yearly contribution of $5300 for single and $10,700 for family coverage. As mentioned previously, there are no limits on the contributions with an ICHRA. - Does the group want to increase contribution to some employee classes than others? For example, do they want to increase their contributions to full-time employees while keeping it the same for part-time employees?
ICHRAs allow different employee classes to be offered different health coverage and different contribution amounts. QSEHRAs do not. - Does the company have more than 50 employees?
QSEHRAs can only be used by companies with 50 or fewer employees. ICHRAs can be used by any company with 2 or more employees.
If the group answers yes to any of these, an ICHRA may be a good option.
One big difference between the two: ICHRAs require that employees have individual plans; QSEHRAs do not. So if you have employees that want to participate in an ICHRA, they will have to select an individual plan.
My group has an existing group plan. How do we transition from that?
They can go from a group plan to ICHRA at any time. They do not have to wait for the annual Open Enrollment Period. Once they decide to move to an ICHRA, they should follow the steps above. It will trigger a Special Enrollment Period (SEP) and they can transition to an ICHRA.
Who is eligible for an ICHRA?
All employees of a company are eligible for an ICHRA. As illustrated above, different classes of employees can be offered different types of plans with different contribution amounts. All employees in that class are then eligible to sign up for the health insurance available in their rating area.
For owners of a company, things are different. Owners of an S Corporation or Sole Proprietorship are not eligible for their ICHRAs, neither is an employee who is already covered by a spouse’s health insurance plan.
Setting up an ICHRA is not that difficult and you don’t have to wait to do it. Plus, an ICHRA with Trovia makes it even easier.
If you have questions, ask your insurance broker or call 1-855-4-NEXBEN.