It is a type of health reimbursement arrangement that allows employers to provide tax-free funds to their employees to help cover the cost of individual health insurance premiums and other eligible medical expenses. Under an ICHRA, employers set aside a specific amount of money that employees can use to purchase individual health insurance plans that best suit their needs. Unlike traditional group health insurance plans, where the employer selects a specific plan for all employees, an ICHRA allows employees to choose their own coverage from the individual market. The funds provided by the employer through an ICHRA can be used to pay for individual health insurance premiums, as well as qualified out-of-pocket medical expenses such as deductibles, copayments, and prescription medications. The reimbursements are tax-free for both the employer and the employee. ICHRA offers flexibility for employers, as they can contribute different amounts for different employee classes, such as full-time versus part-time employees or employees in different locations. This allows employers to tailor their contributions based on factors like age, family size, and geographic location. Employees benefit from ICHRA because they have more control over their health insurance choices. They can select a plan that aligns with their specific healthcare needs and preferences. Additionally, any unused funds in an ICHRA can often be rolled over to the following year, providing employees with potential savings for future healthcare expenses.
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