Your Guide to ICHRA Compliance

Don't be intimidated by ICHRA compliance—this article demystifies the different regulations governing the ICHRA, making it easy for you to provide affordable and compliant health insurance.

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Compliance Rules and Regulations

In today's healthcare landscape, employers are looking for affordable and flexible ways to provide good health benefits, while ensuring compliance with regulations. The Individual Coverage Health Reimbursement Arrangement (ICHRA) is an employer-funded, tax-advantaged health benefit that allows businesses to reimburse employees for their health insurance premiums and qualified medical expenses. With its flexibility, ICHRA empowers employers to design customized health benefits while adhering to the regulations set forth by the Affordable Care Act (ACA). Compliance with these regulations is paramount when offering ICHRA to employees, ensuring the seamless operation of this innovative health benefit.

Affordable Care Act (ACA) Requirements

Under the Affordable Care Act (ACA), employers with 50 or more full-time equivalent employees (FTEs) are required to offer health coverage to their employees. The Individual Coverage Health Reimbursement Arrangement (ICHRA) presents a viable solution for employers to meet this mandate, provided certain criteria are met.

ICHRA can fulfill the employer mandate if it is deemed affordable for employees, and all employees who opt into the ICHRA have individual insurance that meets the minimum essential coverage (MEC) requirements. "Affordable" means that the amount employees have to pay out-of-pocket for a self-only lowest-cost silver plan must be less than a specific percentage of their household income (currently set at 8.39% for the year 2024).

Determining ICHRA Affordability

To determine affordability, employers consider the employee's required contribution for the self-only lowest-cost silver plan minus the ICHRA allowance. If the resulting amount remains below the affordability threshold, the ICHRA is considered affordable, and employers fulfill the ACA's employer mandate. As stated above, the affordability threshold is currently set at 8.39% for the year 2024.

However, if the affordability threshold is exceeded, employees may be eligible for premium tax credits (PTCs) and can potentially opt out of the ICHRA to obtain insurance coverage through the Marketplace or State exchange while still receiving PTCs.

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