How ICHRA Delivers Personalized Healthcare for Employees

Traditional healthcare plans may offer solid benefits for the average American worker, but they often fall short in terms of customizability. 

Remember, implementing a plan that suits the company's budget is just one side of the equation. To maximize employee satisfaction and retention, you need to offer healthcare that's tailored to the specific needs and budget of your workforce. 

Enter ICHRA — short for Individual Coverage Health Reimbursement Arrangement. 

It's a type of HRA designed to address restrictions in traditional insurance, including other employer-funded healthcare plans like Qualified Small Employer Health Reimbursement Arrangement (QSEHRA). 

And that's exactly what we'll explore in this post. 

Read on to learn more about ICHRA, why it's awesome, and how to reap the full benefits of flexible healthcare.

Individual Coverage Health Reimbursement Arrangement (ICHRA): An Introduction

ICHRA has a handful of characteristics that make it stand out against other traditional group healthcare and employer-funded plans. 

But it's worth noting that it also shares a few similarities. 

Just like other HRAs, ICHRA enables employers to set their own monthly spending limits or allowances for employee benefits. It also comes with tax-free reimbursements and tax-deductible contributions — similar to other plans, including Flexible Spending Accounts (FSAs) and Health Savings Accounts (HSAs). 

What makes ICHRA truly unique is, it's designed from top to bottom for customizability.

Let's drill into this a little more.

What are the Benefits of ICHRA? 

To get to know ICHRA a little better, here's a closer look at its benefits:

• No business size restrictions — ICHRA, along with Excepted Benefit Health Reimbursement Arrangement (EBHRA), are the only HRAs that can be used by companies regardless of their size. It can be used whether you have fewer or more than 50 full-time employees.
• Medical expense eligibility — With ICHRA, businesses can specify the types of medical expenses eligible for reimbursement under their plan. The only box you need to check is that the medical expenses should be defined by IRS guidelines. 
• Tier-based benefits — ICHRA allows employers to create tiered reimbursement plans to fit the needs of employees under different lines of work. Aside from full-time and part-time employees, you can designate reimbursement classes for employees working in different geographic locations, freelancers, and even temps.
• Predictability and cost control — As an HRA, employers can set a hard cap on monthly reimbursements to minimize risk. There is also no upper limit on the monthly reimbursement amount, giving you unprecedented levels of control in terms of employee healthcare costs. 
• Streamlined management — While it's prudent to hire a third-party carrier, small-medium businesses can self-manage their ICHRA plan. Using platforms like SimplyHRA, you can set class-based reimbursement plans, monitor transactions, and automate other administrative tasks using a drag-and-drop interface. 

While ICHRA sits at the peak of healthcare customizability, it's not without any checks and balances. 

For one, ICHRA requires employees to be enrolled in an individual health insurance plan in order to qualify for reimbursements. 

The IRS also requires businesses to carefully design nondiscriminatory ICHRA reimbursement plans, even though they're allowed to set different allowances per employee group. The key here is to create plans that are consistent within employee classes — not based on an individual employee's value or salary.

To better understand how allowances in ICHRA work, here's a quick look at how it works.

How Does ICHRA Work? 

• Step 1: Determine your employees' healthcare needs and define employee classes.
• Step 2: Decide the maximum monthly reimbursement amounts per employee class.
• Step 3: Research eligible medical expenses (aside from insurance premiums) for your plan.
• Step 4: Inform employees about your plan and offer support during the enrollment phase. 
• Step 5: Choose an insurer or benefits management platform.
• Step 6: Complete the necessary paperwork (e.g., summary plan descriptions and compliance requirements).
• Step 7: Monitor and use reporting to analyze the effectiveness of your ICHRA plan over time.

The best thing about ICHRA is that it enables customization in almost every step. 

Of course, ICHRA is not going to solve all your employee healthcare problems by itself. You, as an employer, still have to do all the personalization yourself to ensure both employees and your stakeholders are happy. 

The good news is, tailoring ICHRA to your organization's unique needs is not rocket science.

How to Tailor ICHRA to Your Employees

Below are six important ingredients of a perfectly-tuned ICHRA plan for businesses:

1. Understand the Needs of Your Employees

Designing an effective ICHRA plan requires a deep understanding of your employees' healthcare needs — starting with a reasonable reimbursement allowance that can cover their monthly insurance premiums. 

Reviewing your workforce's demographics is a step in the right direction. But if you're serious about providing personalized healthcare, you'll go beyond what you already know through data-gathering techniques like:

• Focus groups
• Surveys & questionnaires
• Open healthcare-related communication channel
• HR records & healthcare utilization metrics

2. Define Eligible Medical Expenses

The next step is to compile a formal list of all eligible medical expenses that can be reimbursed through your ICHRA plan.

Use the data-gathering techniques above to understand your employees' individual healthcare needs. This includes dental work, prescription drugs, physical therapy, family doctor visits, eye care, and alternative treatments.

Also, consider specifying reimbursable over-the-counter medications that your employees need. This adds another layer of personalization to your ICHRA plan, improving its impact on employee satisfaction and retention.

With SimplyHRA, you can make it easy for employees to customize their plans by including eligible benefits in their workspace. 

3. Create Employee Classes

One of the key advantages of ICHRA is that it enables flexible benefits for different employee classes. 

Use the information you've collected so far to set maximum reimbursement allowances for employees. Create distinct employee classes based on employment status and other criteria, such as:

• Contractual or freelance workers
• Seasonal or temporary workers
• Employees working in different locations 

With a tool like SimplyHRA, you can set up multiple employee classes in seconds using the visual editor. You can also set the monthly reimbursement allowance for the employee group in the same form.

Once a reimbursement plan is created, employees can be added to any class upon onboarding. This can also be done in seconds using SimplyHRA's WYSIWYG editor.

4. Set Appropriate Allowance Amounts

Speaking of employee classes, it's important to roll out various reimbursement amounts that are fair, cost-effective, and sufficient for your employees' healthcare needs. 

Striking the middle ground here, of course, can be tricky. But it's definitely more than doable with transparent communication.

Just be sure to give employees a seat at the table when discussing or finalizing allowances. Doing so will make them feel that the ICHRA health plan is indeed for them — not just another item in your compliance checklist. 

Remember, ICHRA reimbursement allowances will persist for the duration of the plan year. Use the pre-renewal phase to adjust your plan based on new regulatory requirements, up-to-date insurance costs, employee feedback, and internal reports. 

5. Focus on Employee Training and Support

Helping employees understand and appreciate your ICHRA plan is just as important as building a healthcare structure tailored to their needs. 

Go beyond the initial kick-off meeting and provide your employees with accessible learning resources. Use a mix of physical and digital media, such as informational brochures, FAQ pages, workshops, and in-person training sessions to get them up to speed on the mechanics of ICHRA. 

If you use SimplyHRA, your team will also gain access to a wealth of up-to-date ICHRA learning resources. This includes a 24/7 AI chatbot that instantly answers any question pertaining to HRAs. 

The chatbot is also equipped to assist with simple tasks, such as reporting reimbursement updates and enrolling dependents. 

6. Establish a Feedback Loop

Of course, no employee healthcare plan comes out perfect right out of the box — no matter how customizable it is. 

It's still possible for employees to feel boxed into plans that don't fully match their healthcare needs. A typical reason for this is the lack of certain healthcare options you may have overlooked during your data-gathering stage. 

The best way to address this issue is to establish a feedback loop where employees can openly voice out their concerns and suggestions. This can be done through multiple channels, like:

• Feedback forms
• Instant messaging channels
• One-on-one office meetings

Businesses should also consider structured data collection strategies like surveys, suggestion boxes, and feedback meetings to extract meaningful and actionable insights. This not only helps improve your ICHRA plan over time, but also makes employees feel more valued in your organization. 

Conclusion

When it comes to employer-funded healthcare, ICHRA is as flexible as you can get. 

It allows employers to fine-tune nearly every single aspect of their healthcare offerings — from their monthly allowances to reimbursable medical expenses. 

However you slice it, you can streamline ICHRA with the help of visual platforms like SimplyHRA. 

It has everything you need to design, implement, and manage a robust ICHRA plan within hours. See it in action by requesting a free personalized demo here!