Health reimbursement arrangements (HRAs) have traditionally been used for medical cost sharing purposes to help employees with copays, coinsurance and deductibles. On June 13, 2019, the Departments of Labor, the Treasury, and Health and Human Services issued a final rule creating a new type of HRA—the individual coverage HRA (ICHRA). ICHRAs are defined contribution, account-based arrangements exclusively funded by the employer to reimburse employees’ medical expenses. The accounts are notational or bookkeeping entry accounts and are not funded as part of a trust. The rules for ICHRAs were effective on or after January 1, 2020. As relatively new plans, the details are still somewhat unknown to many. Employers may have questions about the suitability for their workforce or if ICHRAs can help them address health care costs.  

In the International Foundation’s recent webcast, “ICHRA Overview for Employers: The Health Plan 401(k) Has Arrived”, Newfront’s Brian Gilmore identified considerations for both employers and employees in using an ICHRA, addressed compliance requirements, and discussed broader concerns and issues including the connection between ICHRAs and defined contribution plans.

Three Takeaways From the Webcast

1.Employees covered by an ICHRA must be enrolled in an individual policy first. Individual policies are not covered by ERISA. However, ICHRAs are considered a group health plan subject to both ERISA and COBRA. IRS COBRA guidance for ICHRAs is still vague at this point.

2. ICHRAs could reimburse employees for specialty medical costs such as treatment for mental health care, infertility or other medical conditions that may not be sufficiently covered by medical benefits but are highly valued by employees.

3. The defined contribution health care approach may appeal to employers for various reasons.

  • The employee chooses their own individual policy and has access to all insurance carriers and plan designs available in their area. In addition, employees with health conditions can enroll, as ACA plans prohibit medical underwriting and pre-existing condition exclusions in the individual market. The employer is not involved with plan selection or other administrative tasks related to the purchase and would therefore have no fiduciary responsibility for the underlying insurance policy. Offering an ICHRA to employees is treated as an ACA offer of coverage and can help employers avoid employer mandate penalties.

The employer has flexibility in the amount of funding for the ICHRA and can manage their own fixed costs for reimbursement purposes.

Resources

  • International Foundation members can access a free recording of the webcast to take a deeper dive into ICHRAs. 
  • Access our three-part blog series on ICHRAs.

Purchase our Health Reimbursement Arrangements (HRAs) e-Learning course including ICHRAs.

Anne Newhouse, CEBS
Information/Research Specialist at the International Foundation of Employee Benefit Plans

Keep up with Word on Benefits:

Anne Newhouse, CEBS

Information/Research Specialist at the International Foundation of Employee Benefit Plans Favorite Foundation Service: The Information Center! Members having the ability to have an information specialist research their topic is a great benefit. Favorite Foundation Moment: Attending the 2013 CEBS conferment ceremony in Boston as an official CEBS graduate. Benefits Related Topics That Interest Her Most: Benefit communication—helping employers understand what employees want and the way they want it communicated to them. Personal Insight: Anne may spend her days in the International Foundation employee benefits library, patiently researching answers to member questions—but after work, she’s ready to move with a bike, hike or walk in the great outdoors.

Recommended Posts

Open pharmacy pill containers on a pile of 20 dollar bills.

What the Executive Order Increasing PBM Fee Transparency Means for Employers

Amanda Wilke, CEBS
 

On April 15, 2025, President Trump signed the executive order (EO) “Lowering Drug Prices by Once Again Putting Americans First,” which includes specific actions to be taken by federal agencies to reduce prescription drug costs, improve transparency and increase competition in the […]

GLP-1 Drug Coverage Continues to Rise in Canada 

Rebecca Plier
 

New Survey Data Reveals Prior Authorization or Other Utilization Management Strategies, Eligibility Requirements, Annual Maximum as Leading Cost Control Methods  A new survey report from the International Foundation of Employee Benefit Plans reveals updated Canadian employer coverage and cost-control mechanisms surrounding glucagon-like […]

GLP-1 Drugs Responsible for Over Ten Percent of Annual Claims 

Rebecca Plier
 

New Survey Data Reveals Rise of GLP-1 Drug Claims, With Utilization Management and Eligibility Requirements as Leading Cost-Control Mechanisms   A new survey report from the International Foundation of Employee Benefit Plans reveals updated U.S. employer coverage and claims representation surrounding glucagon-like peptide-1 […]