Are you currently deciding between an EBHRA plan or an ICHRA plan?
Whether you work as part of a group, are self-employed, or are retired, you may have questions about health insurance.
There are hundreds of options that accompany health insurance. You want to be sure you’re getting the best deal; however, plans change depending on your employment status, age, and several other factors.
Moreover, you may have heard about either EBHRA or ICHRA plans but don’t know where to start. Even with the opinions of friends and family, choosing between the two can be confusing. If you’re an employer, you have extra pressure to do right by your employees and save your business money.
We’ll walk you through the different types of EBHRA or ICHRA plans to help you decide what works for you.
ICHRA Plan vs EBHRA Plan
Learn more about which Health Reimbursement Arrangements (HRA) fits your needs better. We’ll begin by defining the two plans and getting into the details of what makes them different.
What Is ICHRA?
ICHRA stands for Individual Coverage Health Reimbursement Arrangement. It’s an HRA plan for organizations of any size that allows tax-free reimbursements for employees. HRAs, in general, began in 1974 to help minimize the costs of medical care.
Today, HRA plans allow reimbursement funds to be used for medical care and even premiums. An ICHRA plan offers these same benefits but must combine it with the Affordable Care Act (ACA). An employee can also use Premium Tax Credits if it’s a more affordable option than HRA dollars.
An ICHRA plan allows employers and employees to have more flexibility when choosing a health plan that works for them.
- Choose their own coverage within the local market
- Use allowances on a ton of benefits like premiums, co-pays, and more
- Set a budget
- Delegate an ICHRA plan for full-time or part-time only employees
- Design a plan around an employee’s location
An ICHRA plan comes down to four basic steps:
- The employer designs the benefits by setting a budget for allowances and choosing which employees can participate, and then employees…
- Choose their own health insurance plan
- Submit receipts to employer
- Finally, employers review and reimburse their employees, and the employer keeps any unused allowance
What’s A Premium Tax Credit?
A Premium Tax Credit is money taken away from taxes when filed. You can then use that money to pay a health insurance provider to lower the cost of a premium. You can also use it to save until the next tax filing is due. Eligibility for a Premium Tax Credit depends on a few factors, including:
- Family size
- Benchmark health plan value eligibility
What Is EBHRA?
EBHRA means Excepted Benefit Health Reimbursement Arrangement. It works similarly to an ICHRA plan and includes the following steps:
- The employer chooses an EBHRA account for their employees, then those employees
- Sign up for all eligible benefits
- Pay their premium for their healthcare provider
- Submit a reimbursement request
There are a few differences with an EBHRA plan. Employers must also offer a group health plan to the same group of employees as well. In addition, enrollment in both is not necessary. There is also a benefit limit of $1,800 per person annually.
Additionally, an EBHRA plan can reimburse employees for medical expenses. However, it can’t reimburse premiums for Medicare, IMC, or non-COBRA group coverage. An employer may only offer either an ICHRA or EBHRA plan, not both.
ACA Options And HRA Plans
Better known as “Obamacare,” the ACA stands for the Affordable Care Act. Signed into law by President Barack Obama in March of 2010, its main goals are to:
- Make health insurance affordable for more people
- Have states expand Medicaid to adults living below the poverty line
- Back innovative medical care delivery solutions
With the Affordable Care Act (ACA) came about many changes to HRA plans. One of those changes became another HRA aside from an ICHRA and EBHRA called QSEHRA. It means Qualified Small Employer Health Reimbursement Arrangement. QSEHRA is for small businesses rather than companies of any size. Because smaller businesses typically do not offer group coverage for their employees. This type of plan can cover medical expenses as well as premiums.
In general, businesses with more than 50 full-time employees must provide health insurance to employees. Or they’re subject to pay a tax penalty for not offering affordable health coverage.
What Is A Qualified Plan For An ICHRA And EBHRA?
According to healthcare.gov, the definition of a qualified health plan is one that is:
- Certified by the Health Insurance Marketplace®
- Offers essential health benefits while following established limits on cost-sharing
- Meets other requirements under the Affordable Care Act
When looking at an ICHRA plan, the following plans are considered qualified:
- Catastrophic plans
- Limits for this include those under age 30 who qualify for a hardship exemption
- Part A+B or part C Medicare
- Student health insurance
- Bronze, Silver, and Gold labeled major medical plans purchased
If you’re considering an EBHRA plan, the following are typically covered:
- Long-term care coverage
- COBRA continuation coverage
- Dental and vision insurance (limited)
- Short-term limited-duration insurance (STDLI)
- Cost-sharing (copays and deductible)
Therefore, an EBHRA plan does not include qualified coverage for:
- Group plan premiums aside from COBRA
- Part A, B, C, or D Medicare
- Individual health insurance
EBHRA And ICHRA Plans: Can You Use Insurance Premiums?
Whether you can use your plan to cover the cost of insurance premiums depends on a few things.
Typically, the answer for this one is no. HRAs of any kind are only for employees and not self-employed individuals.
There are two exclusions to this rule. One is if your business is a C-Corp. The second is if you own a company that is a sole proprietorship. You must also not have a spouse that is a W-2 employee.
ICHRA Plan: Yes, small businesses and companies of any size can use an ICHRA plan for insurance premiums.
EBHRA Plan: Small businesses can use EBHRA plans for employees. However, employers cannot reimburse employees for certain health insurance premiums.
ICHRA Plan: If you’re retired, you have the same benefits of using an ICHRA plan. This is true as long as you would have had those same benefits at the job and role you were at before retirement.
EBHRA Plan: No. If you plan on using an EBHRA plan and are retired, you no longer have an employer to reimburse you for insurance premiums. Only individual medical expenses will apply.
Diana Reeves Can Help
There are a multitude of options to choose from when it comes to health insurance plans. It can get confusing when you’re attempting to navigate all of the choices on your own. What you need is an insurance agent who’s an expert at knowing what you need, no matter your level of employment. Diana Reeves serves Americans by helping them find their optimal plan and getting them better coverage every day.
Are you feeling stuck in your search for a health plan that works for you?