A premium & medical ICHRA (individual coverage health reimbursement arrangement) is an employer-funded plan that reimburses employees for both individual health insurance premiums and qualified out-of-pocket medical expenses.
A premium & medical ICHRA combines the flexibility of choosing your own insurance with additional flexibility for covering your healthcare costs.
Health plan requirements
To participate in a premium & medical ICHRA, you must purchase and maintain individual health insurance that provides minimum essential coverage. You cannot be enrolled in a group health plan.
Individual health insurance is purchased directly from an insurance company or through the Health Insurance Marketplace. The policy is in the individual's name, not provided by an employer. Group health plan is health insurance provided by an employer to employees as a workplace benefit.
Reimbursement
Purchase your individual health insurance policy and pay the premiums out-of-pocket first. Pay for qualified medical expenses out-of-pocket. Submit proof of premium payments and medical expenses with documentation for reimbursement up to your available allowance.
Eligible expenses
You can submit for reimbursement both insurance premiums and qualified medical expenses.
Insurance premiums
Individual health insurance plans (Marketplace or private)
COBRA continuation coverage
Dental and vision insurance premiums (if separately purchased)
Medicare Parts A, B, C (Advantage), and D
Medicaid premiums (if applicable in your state)
Qualified medical expenses
Chiropractic care
Coinsurance
Copayments
Deductibles
Hospital services
Lab tests and imaging
Medical equipment and supplies
Mental health services
Over-the-counter medications (with a prescription)
Physical therapy
Prescription medications
Preventive care services
Specialist visits
Ineligible expenses
Check your plan documents for specific exclusions. Generally, cosmetic procedures and non-medical expenses are not eligible.
Funding
ICHRAs must be funded by employers; employees cannot contribute to ICHRAs. (Thanks boss!)
Your employer sets an allowance amount. Some employers may require you to use funds for premiums first, while others offer complete flexibility.
Limits
Your employer determines your premium & medical expenses ICHRA allowance amount.
Taxes
ICHRA employer contributions and employee reimbursements are not subject to federal income tax, Social Security tax, or Medicare tax.
If reimbursed for expenses through your premium & medical ICHRA, you cannot include those expenses in your medical expenses when filing your taxes.
Ownership
Premium & medical ICHRA funds belong to your employer. If you leave your job, you lose access to your ICHRA. Your individual insurance policy remains yours—you'll just pay premiums and medical expenses yourself going forward.
Other benefits
ICHRAs that reimburse medical expenses are generally not compatible with HSAs. However, there's an important exception: if you have an HSA-eligible health plan and have met your deductible, you can use ICHRA funds for qualified medical expenses. Before meeting the deductible, ICHRA funds cannot be used for medical expenses if HSA contributions are being made.
Limited-purpose FSAs (dental/vision only) are compatible with premium & medical expenses ICHRAs. Standard health FSAs are not compatible.
Double dipping
You cannot submit a claim for the same expense to multiple tax-advantaged accounts. If your benefits administrator determines you've submitted duplicate claims, they will ask you to pay back the overpayment.