Jeremy Wolf |
ICHRAs represent a modern approach to employer-funded health benefits. Introduced in January 2020, these arrangements allow employers to reimburse employees for their individual health insurance premiums and other medical expenses, rather than providing a traditional group health plan. This model offers flexibility and personalization, enabling employees to choose plans that best fit their needs while allowing employers to control costs.
On the other hand, Premium Tax Credits are a cornerstone of the Affordable Care Act (ACA). These credits make health insurance more affordable for individuals and families with low to moderate incomes by reducing their monthly premiums. They are available to those who purchase insurance through the Health Insurance Marketplace and are not offered an affordable, minimum-value employer plan.
Employees cannot receive both ICHRAs and Premium Tax Credits if they've been offered affordable coverage. If an employee is offered an ICHRA, they are considered to have been offered affordable coverage by their employer, which typically disqualifies them from receiving Premium Tax Credits. However, the affordability of an ICHRA is determined by specific criteria, including the employee's age and household income. If the ICHRA is deemed unaffordable under ACA guidelines, the employee may opt out of the ICHRA and instead qualify for Premium Tax Credits.
The interaction between ICHRAs and Premium Tax Credits can be confusing. As employers increasingly adopt ICHRAs, employees must navigate the complexities of choosing between ICHRA as an employer-sponsored benefit, vs potentially valuable tax credits. This intersection raises important questions about healthcare affordability and accessibility, and the future of healthcare benefits in the United States.
Understanding ICHRAs and Premium Tax Credits is essential not only for those directly involved — such as HR professionals, employers, and employees — but also for policymakers, healthcare providers, and insurers. As the healthcare sector continues to evolve, these mechanisms play a pivotal role in shaping the accessibility and affordability of health insurance, directly impacting the well-being and financial stability of millions of Americans.
There are a couple main areas to consider here:
Working with an ICHRA provider like Thatch can help employers navigate these complexities and ensure that their ICHRA is compliant with ACA guidelines.
Employees essentially have a few options:
This decision can be challenging, as employees must weigh the costs and benefits of each option. Employers can help employees make an informed decision by providing them with the necessary information and resources.
Ultimately it's challenging for employers to determine affordability requirements and help employees make the best decision. Working with an ICHRA provider like Thatch can help you navigate these complexities and ensure that your ICHRA is compliant with ACA guidelines.
Thatch is the easiest way to offer an ICHRA. We automate compliance and help employees choose between premium tax credits and ICHRA.Schedule demo