ICHRA VS. GROUP INSURANCE

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 An ICHRA,(ick-rah) or Individual Coverage Health Reimbursement Arrangement, is an employer-sponsored health benefit that gives employees tax-free funds to purchase individual health insurance plans and cover medical expenses. Employers of any size can offer an ICHRA, and they can choose eligibility rules, such as full-time or part-time status, and set allowances for different employee classes. This approach offers employees more choice compared to a traditional group plan, while giving employers more control over costs by setting a maximum reimbursement amount 

• Employee chooses a plan: Instead of being on a single employer-sponsored group plan, employees use the ICHRA funds to select and pay for their own health insurance policy on the individual market, through the health insurance marketplace, or Medicare. 
• Employer contributes: The employer provides a tax-free monthly allowance for each employee. 
• Reimbursement: Employees submit claims for their insurance premiums and other qualified medical expenses to be reimbursed with their ICHRA funds. 
• Cost control: Employers can control costs by setting the maximum monthly reimbursement amount they will provide. 
• Compliance: ICHRAs must meet IRS requirements, including offering a choice of plans and providing a clear process for employees to submit claims and receive their funds. 

• Eligibility: Employers can create different employee classes, such as full-time, part-time, or seasonal, and can set different allowances for each class. 
• Tax benefits: Employer contributions are tax-deductible, and employees receive the reimbursements tax-free. 
• Flexibility: ICHRAs offer flexibility for both employers and employees. Employers can manage costs and tailor benefits to different employee groups, while employees can choose a health plan that best suits their needs. 
• Compliance: Employers must be aware of and adhere to various compliance requirements, including ACA, ERISA, and other reporting obligations. 
• Unused funds: Funds not used by an employee to purchase health coverage generally remain with the employer. 

 The following types of expenses are generally eligible for tax-free reimbursement: 

• Individual Health Insurance Premiums: Premiums for major medical plans purchased on or off the Health Insurance Marketplace, catastrophic plans (if eligible), and Medicare Parts A, B, C, and D, as well as Medicare supplemental policies.
• Out-of-Pocket Costs: Deductibles, copayments, and coinsurance for covered services.
• Medical and Preventive Care:
  • Doctor and specialist visits
  • Annual physical exams, screenings, and vaccinations
  • Hospital services and surgery
  • Mental health care, counseling, and psychiatric care
  • Chiropractic care and acupuncture
  • Physical therapy
  • Alcoholism and drug addiction treatment
• Prescription Medications & Supplies:
  • Prescription drugs
  • Insulin and diabetic testing supplies
  • Over-the-counter medications (e.g., cold meds, allergy medicine, pain relievers) are now eligible without a doctor's prescription due to the CARES Act.
  • Menstrual products (tampons, pads, liners, cups).
• Dental and Vision Care:
  • Dental exams, cleanings, fillings, extractions, braces, and dentures.
  • Eye exams, prescription eyeglasses, contact lenses, and supplies.
  • Medically necessary eye surgery (e.g., LASIK).
• Medical Equipment and Supplies: Items like bandages, crutches, wheelchairs, hearing aids, breast pumps and supplies, and diagnostic products (e.g., blood pressure monitors, thermometers).
• Other Services: Transportation for medical care, home modifications for medical reasons (e.g., ramps, support bars), and service animals and their maintenance costs.

 Expenses that are merely beneficial to general health or for cosmetic reasons are not eligible for reimbursement, including: 

• Gym memberships or health club dues (unless prescribed by a doctor for a specific medical condition).
• Cosmetic surgery (unless medically necessary).
• Most nutritional supplements or vitamins (unless prescribed).
• Personal use items like deodorant, shampoo, or general wellness products. 

For a complete and detailed list of all eligible and ineligible expenses, refer to the official IRS Publication 502