Who actually created ICHRA — and why?

Who actually created ICHRA — and why? Here’s a brief overview of the relevant legislation. 

In 2010, President Obama passed the Affordable Care Act, establishing individual markets and requiring that businesses of a certain size offer affordable coverage to their employees and dependents. 

The 21st Century Cures Act in 2016 opened the door for businesses with fewer than 50 employees to offer Qualified Small Employer HRAs (QSEHRAs). 

Foundation for ICHRA plans: Executive Order 13813

President Donald Trump issued Executive Order 13813 on October 12, 2017. Titled “Promoting Healthcare Choice and Competition Across the United States,” this did not establish ICHRA. Still, it did set the stage by stating his administration’s prioritization of health reimbursement arrangements (HRAs) among other areas for improvement. 

This executive order directed the Treasury, Labor Department, and HHS secretaries to propose regulations to increase HRA usability and expand employers’ ability to offer such plans to their employees. The goal was to provide more options for Americans to finance their healthcare and  “increase the usability of HRAs, to expand employers’ ability to offer HRAs to their employees, and to allow HRAs to be used in conjunction with nongroup coverage.”

ICHRA insurance plans: employer size restrictions lifted

QSEHRAs were a useful, cost-efficient option for small businesses with fewer than 50 employees. Employees could now purchase individual health coverage plans that met their specific needs. However, QSEHRAs were unavailable for large employers, and there were limitations on how much employers could reimburse employees. 

Individual Coverage Health Reimbursement Arrangements — known as ICHRA for short — allowed employers of all sizes to reimburse employees for premiums they pay for individual health insurance policies, in part or in full, through tax-free money. ICHRA has no annual caps, offering even more flexibility for employers. Here’s more about the increased capacity of ICHRA versus QSEHRA.

ICHRA removed these restrictions through regulations issued in President Trump’s administration in June 2019 with ICHRA plans available, effective January 1, 2020.

This allowed large companies—including those with 50 or more full-time employees—to meet their ACA employer mandate through individual plans. ICHRA affordability determinations use the same income formula that applies to employer group plans. They are calculated based on the cost of the lowest-priced Silver marketplace plan after ICHRA contributions are subtracted from the plan’s cost.

As ICHRAs gain popularity, more companies are investigating how they can benefit their businesses and their employees. This means that more people want to understand the definitions of ICHRA terms found here. 

ICHRA: part of the ongoing development of employer-sponsored plans

The United States has been working towards the optimal solution for quality health insurance for a long time — in fact, as far back as 1798! This is when the U.S. Congress created Marine Hospital services for men working on the sea, requiring deductions for services from the seamen’s salaries. 

In general, though, health insurance was a commercial transaction occurring between American individuals and families and private insurance companies. In 1942, a shift occurred; as part of the Stabilization Act, Congress approved creating employee insurance plans. 

Then, 68 years later, Congress passed the ACA on March 23, 2010. Through this ACT, applicable employers began to be required to share the responsibility of providing minimal, affordable health care insurance to full-time employees and their families or make a shared responsibility payment to the IRS. This responsibility is often called the “employer mandate.”

Executive Order 13813, signed by President Trump in 2017, was the first significant change to the ACA. ICHRA plans greatly expanded the pool of businesses empowered to use this approach to provide employee benefits. 

ICHRA insurance plans’ reporting requirements

In Thatch’s reporting guide for ICHRA plans, we streamline the process of staying in compliance. Overall, this guide can help prepare your business to talk with a qualified benefits professional or legal advisor about what ICHRA would require from your company. Four types of reporting that can be required include these:

• ACA reporting: When offering ICHRA insurance plans, employers must file a 1095 form to the IRS for each employee along with 1094 transmittal forms. They must also provide copies of 1095s to the relevant employees. To help your company, Thatch partners with an ACA reporting vendor that can assist with reporting needs. Or, you can use your tax or payroll vendor.

• Patient-Centered Outcomes Research Institute (PCORI) reporting: Companies offering ICHRA must pay a small fee for each employee participating, calculating and reporting them to the IRS on Form 720 as part of an applicable self-insured health plan. Thatch simplifies the calculation of fees by providing the number of your ICHRA participants on your dashboard. Then, you can use this information to file Form 720 with your tax professional.

• Employee Retirement Income Security Act (ERISA) reporting: If your company has more than 100 ICHRA participants, you must report on Form 5500. Thatch will surface reporting information on the dashboard to simplify the process. 

• Medicare Part D Reporting & Creditable Coverage Disclosures: This involves reporting information on the Center for Medicare Services website, listing ICHRA plans as non-creditable. Employees who are eligible for Medicare Part D and have a prescription drug insurance plan must receive appropriate disclosures. Thatch will make these disclosures directly available in employee and employer dashboards.

Get started with Thatch and ICHRA

If your company is interested in learning more about ICHRA insurance plans and how they can complement your approach to employee benefits, please take a look at our ICHRA plan demo. Thatch is providing businesses a simpler, more personalized way to provide their teams with healthcare.