This type of health insurance coverage option is growing in popularity among employers. While the ICHRA option does allow employers to be less liable for their employees’ health insurance coverage, it is still crucial that you can prove the affordability of this plan.
Calculating affordability is a complicated process no matter what your group health insurance plan looks like. As an employer, you want to be sure that you are maintaining your ACA compliance, and affordability is a huge part of that.
Let’s start out with a little background information.
What is an ICHRA?
An ICHRA, or Individual Coverage Health Reimbursement Arrangement, is an alternative for traditional health insurance group plans. With this type of plan employees choose their own health insurance coverage, potentially from the Healthcare Marketplace. Because their employer receives a tax deduction for these plans, their employees in turn get a tax-free reimbursement.
The employee is initially responsible for the monthly premium and medical expenses related to the plan. Then after submitting the required information to their employer, they will receive set reimbursements.
How Do You Report ICHRA Information to the IRS
Employers must report ICHRA plans on Form 1095-C. The revised draft of Form 1095-C for 2020 has a line dedicated to this information. Line 17, Zip Code, must be completed by any employer that chooses to offer their employees an ICHRA. The IRS will use the employees’ zip code to ensure the affordability of the plan.