A dependent premium & medical ICHRA (individual coverage health reimbursement arrangement) is an employer-funded plan that reimburses employees for both health insurance premiums and qualified medical expenses for their eligible dependents.
Health plan requirements
To participate in a dependent premium & medical ICHRA, your eligible dependents must be enrolled in individual health insurance that provides minimum essential coverage. They 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.
Dependents
Your employer defines eligible dependents for your ICHRA. Generally, this includes:
Your legal spouse or domestic partner
Your children (biological, adopted, stepchildren, or foster children) under age 26
Other tax dependents as permitted by your employer's plan
Confirm with your employer which dependents qualify under your specific plan.
Reimbursement
Purchase individual health insurance for your eligible dependents and pay the premiums out-of-pocket first. Pay for your dependents' 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 your dependents' 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
Your employer determines which dependents and expenses qualify under your specific plan.
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 for dependent coverage. Some employers may set separate allowances for employee versus dependent coverage.
Limits
Your employer determines your dependent premium & medical 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 dependent premium & medical ICHRA, you cannot include those expenses in your medical expenses when filing your taxes.
Ownership
Dependent premium & medical ICHRA funds belong to your employer. If you leave your job, you lose access to your ICHRA. The individual insurance policies you purchased for your dependents remain active—you'll just pay for premiums and medical expenses yourself going forward.
Other benefits
Dependent premium & medical ICHRAs that reimburse medical expenses are generally not compatible with HSAs. However, there's an important exception: if your dependents have an HSA-eligible health plan and have met their deductible, you can use your ICHRA funds for their 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 dependent 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.