Combining ICHRA with other insurance products offers employers flexibility and cost savings, but specific rules must be followed for compliance and maximum benefits. This guide explains how to combine ICHRA with group insurance and pre-tax options like cafeteria plans.
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ICHRA allows employers to reimburse employees for individual health insurance and medical expenses, offering a flexible alternative to traditional group insurance. It can be customized for different employee groups, providing tailored coverage. This post explores how combining ICHRA with group insurance delivers flexibility and cost savings.
Key Takeaways:
Yes, ICHRA can be combined with group insurance under specific conditions. You can offer one group of employees an ICHRA and offer a group plan to another group, based on predetermined ICHRA classes, but keep in mind you can't offer a group plan and an ICHRA to the same employees.
How Does ICHRA Differ from Group Insurance?
Unlike group insurance, which provides the same plan for all employees, ICHRA allows employees to choose their health plan, tailoring coverage to individual needs.
This flexibility makes ICHRA ideal for combining with group insurance in diverse workforces.
Check out our post on ICHRA vs group health insurance for more info.
Combining ICHRA with group insurance allows employers to tailor benefits to different employee groups.
Key reasons to combine the two include:
This approach maintains group plans for key employees while offering cost-effective, flexible options for others.
While both ICHRA (Individual Coverage Health Reimbursement Arrangement) and QSEHRA (Qualified Small Employer Health Reimbursement Arrangement) are types of HRAs designed to reimburse employees for health expenses, they have significant differences, particularly when combined with group insurance plans.
What Is QSEHRA?
QSEHRA is a type of HRA designed specifically for small employers with fewer than 50 full-time employees. It allows these employers to reimburse employees for individual health insurance premiums and other qualifying medical expenses. Like ICHRA, QSEHRA offers a flexible alternative to traditional group health insurance but has more restrictions.
QSEHRA cannot be combined with group health insurance, while ICHRA can. QSEHRA was designed for small employers without group insurance, allowing them to provide healthcare benefits. If a group plan is already in place, QSEHRA cannot be added. In contrast, ICHRA offers more flexibility for larger employers, allowing them to combine group plans with ICHRA for different employee classes, such as offering group coverage to full-time employees and ICHRA to part-time or remote workers.
If your business already offers a group health plan or you plan to, ICHRA is a clear choice, as it allows you to offer different health benefits depending on employee classification. On the other hand, QSEHRA is best suited for small employers who want to offer a health reimbursement benefit without a group plan.
To combine ICHRA with group health plans, specific conditions must be met for compliance:
In summary, employers must offer only one health benefit per employee group and meet minimum size criteria to combine ICHRA with group insurance.
Combining ICHRA with group insurance allows employers to tailor benefits for different employee classes while managing costs. Here are some common strategies:
Full-time employees typically benefit from group plans due to stable hours, while hourly workers can use ICHRA for individualized coverage. This strategy controls costs by limiting group plan expenses for part-time employees.
Maintain the group plan for current staff and offer ICHRA to new hires. This allows a gradual transition to an ICHRA-based model, reducing group plan obligations over time while offering comprehensive coverage.
Local employees can take advantage of regional network benefits through a group plan, while remote workers use ICHRA to select individual coverage suited to their location. This approach offers flexibility without geographic limitations.
Salaried employees receive comprehensive group coverage, while hourly workers use ICHRA to tailor coverage to their needs. This helps employers manage costs and provide personalized benefits for each class.
Employers can offer Excepted Benefit HRAs (EBHRA) alongside group health plans. EBHRAs cover limited benefits like dental, vision, and preventive care, providing flexibility even for employees not enrolled in the group plan.
EBHRA offers more flexibility since it doesn’t require group plan participation.
Employees can use EBHRA funds without enrolling in the group plan. For example, employees with coverage through a spouse can still access EBHRA for eligible expenses, providing flexibility for those with outside insurance.
EBHRAs offer supplementary benefits, making them a great option for employees with existing coverage.
Combining Health Reimbursement Arrangements (HRAs) with cafeteria plans allows employers to offer flexible, cost-effective health benefits while maximizing tax savings for both the business and employees.
Combining an HRA with a cafeteria plan provides flexibility for employees and cost savings for employers. Employees can use their HRA for medical reimbursements while using pre-tax cafeteria plan contributions for premiums and other expenses, reducing their taxable income.
Key benefits include:
The main reason for combining HRAs with cafeteria plans is tax savings.
Reduced tax obligations benefit both employers and employees, making this combination highly appealing for small—to mid-sized businesses looking to offer competitive benefits.
To illustrate the benefits of combining HRAs with cafeteria plans, let's explore two examples demonstrating savings for employees and employers.
Sarah earns $50,000 annually and receives a $2,000 HRA contribution from her employer. Without a cafeteria plan, her entire $50,000 salary is taxed. If Sarah contributes $2,000 pre-tax to a cafeteria plan, here's the comparison:
Sarah reduces her taxable income, saves on taxes, and covers medical expenses more efficiently.
Sarah's employer also benefits by reducing payroll taxes. Here's the comparison:
The employer saves $153 per employee annually. For 100 employees, the savings would be $15,300.
These examples demonstrate how combining HRAs with cafeteria plans benefits both parties, making it an attractive option for cost-effective healthcare.
Combining ICHRA with other insurance products, like group plans or cafeteria plans, offers employers and employees a flexible and cost-effective solution. Companies can optimize their health benefits by understanding the conditions and options available while providing personalized coverage that meets diverse employee needs. Whether tailoring benefits for different employee groups or managing costs, combining ICHRA with other insurance options can be a strategic advantage for your business.
Need help navigating your options? Take Command can answer your questions and guide you through combining ICHRA with other insurance plans.