How ICHRA simplifies health care insurance coverage for employees in different states

When your company has employees in more than one state, your human resources department may find it challenging to locate a health insurance plan that is available for all qualifying employees. This can especially be true when there are employees in multiple states. 

Options can include:

• National plans

• State plans 

• ICHRA

Each can offer benefits for companies with employees covered in multiple states, and ICHRA may be the best health insurance option in this scenario.

Pros and cons of choices: insurance coverage for employees in different states

With national plans, your company must be clear about the state requirements for each state where you have employees and find a plan that meets all the requirements. Not all health insurance plans are available across state lines, and some may require different plans for different regions, which can be complicated and expensive. Plus, state requirements can evolve, triggering a need to monitor and potentially change the insurance plan offered. 

If you can find a national plan that meets all of the requirements, it can work well. However, you’ll need to monitor state changes to ensure that the plan continues to meet each requirement. You may also add employees from additional states, expanding the required due diligence and administrative work.

With state plans, you’ll need to investigate and choose plans within each state where 

people work for your company. This can also work but can be time-consuming to implement, and you’ll need to manage multiple types of paperwork, including different types for each state.

As a third option, you can choose to use ICHRA to provide insurance coverage for all employees in different states to all qualifying employees. With this approach, you can offer a consistent reimbursement plan nationwide, allowing employees to choose the health insurance plans that fit their needs while reducing the administrative complexity of managing multiple group plans in your company. 

More about ICHRA and individual coverage

Individual Coverage Health Reimbursement Arrangements (ICHRAs for short) are a type of benefits plan allowing employers to reimburse all qualifying employees for their individual health insurance premiums. Employers set aside a specific amount of money to reimburse eligible employees in part or in full; more information is available in our ICHRA overview.

Benefits of ICHRA plans for employers and employees

ICHRA streamlines the process of offering insurance coverage for employees in different states, saving your human resources department time — and saved time translates into saved money. This allows larger companies subject to the ACA employer mandate to satisfy this requirement in ways that empower their employees with choice. Here are ICHRA administration tips for companies.

According to Perspectives on Psychological Science, when employers satisfy their teams, employees are more likely to stay. Increased retention also saves companies money. Meanwhile, Procedia Economics and Finance found that satisfied employees are more loyal and committed to the company and are also more efficient, effective, and productive workers. 

Employees, meanwhile, can choose health insurance plans that fit their unique needs and receive premium reimbursements from their employers. In general, reimbursement funds are tax-free, although it’s always best for individuals to check with their tax advisors for specifics. 

Growing ICHRA adoption rates

ICHRAs are fairly new (if you’re exploring them for the first time, here’s help with ICHRA term definitions). In October 2017, President Donald Trump issued Executive Order 13813 (Promoting Healthcare Choice and Competition Across the United States) that opened up the possibility of ICHRA creation. That year, small businesses could participate in a health reimbursement program through Qualified Small Employer HRAs (QSEHRAs).

ICHRA became a reality in June 2019, and plans will be available in 2020 for companies of all sizes, including larger companies, subject to the ACA employer mandate to provide healthcare insurance to qualifying employees — companies with 50 or more full-time or full-time equivalent employees. 

By the end of the first year, 19 states were labeled as “ICHRA-friendly,” and the following year, nearly half of the country (24 states) received that label.This clearly demonstrates how ICHRA can serve as insurance coverage for employees in different states for a company. 

Offering ICHRA for out-of-state employees: the ICHRA Final Rule

First, employers create ICHRA classes by designating tiers of employee categories based on accepted considerations such as employment status (full or part-time), salary type (hourly or salaried), geographic locations, employees in a waiting period for benefits, foreign employees working abroad, and so forth. Your company can also combine two or more acceptable category designations to customize another category. Employers can then flexibly provide levels of reimbursement based on the employee's category. 

If your company plans to offer traditional health care insurance to at least one employee class and ICHRA to at least one employee class, then minimum class size requirements kick in.

Class minimum sizes are as follows:

• Fewer than 100 employees: class size minimum is 10

• 100-200 employees: class size minimum is 10% of employees, being rounded down to the nearest whole number

• 200 or more employees: class size minimum is 20

Here’s a different scenario to consider. Perhaps your company is based in one state, but you’ve since expanded to multiple other states. For example, you may offer traditional health insurance plans in your home state and ICHRA in other states. If you go this route, then you don’t have to worry about ICHRA minimum class size requirements. 

Or, you can offer ICHRA plans to all qualifying employees, providing insurance coverage for employees in different states similarly. In this case, minimum class size requirements don’t apply. Going this route simplifies your company’s health care benefits program, customizing reimbursement allowances for employees covered in multiple states and giving you more control over your business’s budget for benefits. 

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Thatch is providing businesses like yours with a customized, streamlined way to provide healthcare benefits to employees. Request a demo with our team today!