The story of ICHRA, a bipartisan bill comes to life

The American healthcare system has a long and complicated history. In the past decade, healthcare coverage in the US has seen some of its biggest changes. 

The passage of the Affordable Care Act (ACA) ushered in a new era of coverage in the United States, creating new opportunities for employer-sponsored healthcare. 

Want to understand the stories behind the acronyms? Read on for a history of ICHRA, a bi-partisan bill changing employee healthcare. 

Timeline of the Individual Coverage HRA

• 2010. Affordable Care Act (ACA) passed, laying the groundwork for the individual healthcare market.

• 2016. 21st Century Cures Act passed. Qualified Small Employer Health Reimbursement Arrangement (QSEHRA) introduced.

• 2020. ICHRA is officially enacted. 

• 2024. Growth of individual insurance plans, 20 million enrolled and growing.

ACA and QSEHRA: Predecessors to ICHRA

The history of healthcare has seen its share of ups and downs, and with the Affordable Care Act (ACA), politicians sought to usher in a new era of order and coverage options. On March 23, 2010, President Obama signed the Patient Protection and Affordable Care Act. A week later, he signed the Health Care and Education Reconciliation Act of 2010. Together, the two acts are commonly known as the ACA. 

ACA aims to make healthcare more accessible and affordable to Americans, introducing several new changes or policies to healthcare coverage: 

• Required healthcare coverage for most Americans. This includes coverage through an employer, government, or through the marketplace.  

• Subsidies and expansion of Medicaid. The ACA includes subsidies and financial assistance based on income. It also expanded Medicaid coverage for low-income individuals.

• Coverage for people with pre-existing conditions. Health insurers can’t deny coverage or charge higher premiums for customers with preexisting conditions. Health insurance plans also need to cover preventative care, maternity leave, and mental health services.

• Healthcare marketplace. The ACA creates the healthcare marketplace, where anyone can compare and purchase plans to help Americans find coverage. 

The passing of the 21st Century Cures Act in 2016 also paved the way for ICHRA. With its passing came the creation of QSEHRA, or Qualified Small Employer Health Reimbursement Arrangement. 

QSEHRAs benefit businesses with under 50 full-time employees, helping them offer tax-free reimbursements for qualifying healthcare expenses. Instead of employers selecting plans for employees to choose from, employees shop the marketplace for coverage that best fits their needs. 

From there, employees pay premiums, bills, and other expenses, submitting claims after the fact to their employer for reimbursement. Reimbursements are tax-deductible for the employer and tax-free for employees.   

QSEHRAs are subject to certain regulations and requirements and annual allowance limits for employees.

The passage of QSEHRAs was viewed as a major win for bipartisan healthcare. Proposed by President Obama, the 21st Century Cures Act received overwhelming support from both parties. It creates more coverage choices for small business owners and relies on the healthcare marketplace established by the ACA.   

ACA and QSEHRAs led the way for the creation of ICHRAs. 

Introduction to ICHRA

While HRAs have existed since the early 2000s, Individual Coverage Health Reimbursement Accounts (ICHRAs), as we know it, has only existed since the US Department of Labor, Health and Human Services proposed it as an expanded regulation in October 2018. 

This proposal was meant to expand the function of IRAs to work with individual health insurance policies for companies of all sizes. Unlike the QSEHRAs, Individual Coverage Health Reimbursement Arrangements, ICHRAs are not limited to companies that employ under 50 full-time employees. 

Employers with traditional employer-sponsored healthcare purchase healthcare on behalf of their employees. ICHRA enables employers to offer employees an allowance for individual care. This can provide personalized plan selection, pre-tax benefits, and flexibility.

Key features of ICHRAs include: 

• Individual Insurance Market Access. Unlike traditional group health plans, ICHRAs allow employees to purchase individual health insurance policies. Employees use the reimbursement funds provided by their employer to cover premiums and out-of-pocket costs for these plans.

• Tax Advantages. Employer contributions to ICHRAs are tax-deductible, and employee reimbursements are tax-free, provided they are used for qualified medical expenses.

• Employer Flexibility. Employers have significant discretion in designing ICHRAs. They can set contribution limits, offer different levels of reimbursement based on employee categories, and coordinate ICHRAs with other health benefits.

• Integration with ACA. They are intended to help employees access ACA-compliant plans.

While many would agree this period of time was politically divisive, ICHRAs were embraced on both sides of the aisle, receiving bipartisan support. The policy continues to be championed by both major parties today. Part of the success of the ICHRA as a bipartisan policy lies in its ability to please both parties. For Democrats, it bolsters the strength of the healthcare marketplace, and Republicans appreciate the flexibility and consumer choice the program touts. 

Expanded HRAs, including EBHRA and ICHRA, became effective January 1, 2020. 

Current day and the growth of ICHRA

Adoption has grown in the four short years since the introduction of ICHRAs. In 2023 alone, adoption of HRAs grew by nearly a third, with 83% of large employers selecting an ICHRA. The adoption numbers show that employers with over 50 employees are finding flexible solutions that are a welcome addition in a time of rising healthcare costs. 

But, the choice isn’t likely around expenses alone. ICHRAs offer employees more choices when it comes to coverage and budget. Even in a large corporation, employees don’t have to stick to the one-size-fits-all offering of traditional employer-sponsored healthcare. It’s expected that the adoption of ICHRAs will continue to grow across the industry as care costs rise and employees seek more personalized healthcare solutions. 

The popularity of ICHRAs is growing. Is your company ready to adopt this emerging trend? That’s where Thatch comes in. 

Thatch is helping democratize the process of procuring health insurance for your company, offering a new, more seamless, and cost-effective way to do so through ICHRAs without the challenge of managing it on your own.