ICHRA Plans
ICHRA plans are designed to offer flexibility in how employers provide health benefits to their employees. There are two main types of ICHRAs, differentiated by the scope of expenses they cover:
Premium-only: This type of ICHRA plan allows employees to use the ICHRA allowance for the cost of individual medical plans only. If employees choose a medical plan that costs less than their allowance, they are not entitled to use the excess amount left over.
With excess-allowance: This type of ICHRA plan allows employees to use excess allowances left over after paying for premiums to cover additional qualifying expenses
Additional expenses can include the costs of dental and vision insurance premiums, or other qualifying medical expenses (the type approved by the IRS in Publication 213D, which also applies to HSAs and other types of healthcare accounts).
It’s important to note that only excess amounts can be used to cover other qualifying medical expenses – i.e., the ICHRA allowance must first be used to pay for a medical premium, and only if there are funds left over (i.e., the premium selected is lower than the allowance amount), can the leftover allowance be used for other expenses.