BASE^® Blog

The Individual Coverage HRA (ICHRA) is revolutionizing the way employers manage healthcare benefits. Unlike traditional one-size-fits-all group health insurance plans, ICHRAs promote cost equity and help lower overall healthcare expenses.

What Makes ICHRA Unique?

The ICHRA allows employers to classify employees into different groups, offering tailored reimbursement amounts to each class. This flexibility is a game-changer for businesses looking to provide equitable benefits. The IRS, DOL, and HHS have established eleven allowable classes:

1. Full-time employees
2. Part-time employees
3. Seasonal employees
4. Employees covered by a collective bargaining agreement
5. Employees in a waiting period
6. Foreign employees working abroad
7. Employees in different geographic locations (based on rating areas)
8. Salaried employees
9. Hourly employees
10. Temporary employees from staffing firms
11. Non-resident aliens with no US-based income

Common ICHRA Classifications

Many employers utilize the following classifications:

Part-Time & Full-Time Employees

Employers can offer scaled benefits to both full-time and part-time workers, moving away from the all-or-nothing approach of traditional group plans. This strategy helps attract and retain valuable talent.

Example:
A restaurant with both part-time and full-time staff opts for an ICHRA instead of a group health insurance plan. This allows the restaurant to create separate benefit levels for full-time and part-time employees, adjusting reimbursement contributions based on hours worked. Full-time employees receive higher monthly reimbursements than part-time employees, enabling them to choose individual coverage that fits their needs.

Multiple Geographic Locations

Companies with employees in various regions can adjust reimbursement amounts based on local health insurance costs, ensuring equitable benefits regardless of location.

Example:
A clothing retailer with stores in multiple cities, each with different living costs, uses ICHRA to tailor benefits. The ICHRA allows the retailer to offer higher reimbursements to employees in expensive areas with high-cost insurance markets, while providing suitable reimbursement amounts for employees in less expensive regions.

Why ICHRA Matters Now

In times of high inflation and growing concerns about benefits, the BASE® ICHRA offers a flexible solution to the one-size-fits-all dilemma. Classifications allow employers to really customize their benefits without having to worry about minimum class sizes, while providing a more adaptable benefit strategy that meets diverse employee needs. BASE can help clients use various classes to design a plan customized to their needs and budgets, so reach out today with questions at 1-888-386-9680.

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Health insurance premiums are one of the biggest pressures businesses face, according to the JPMorganChase Institute. With healthcare costs rising each year, employers are constantly seeking new insurance products that balance cost and quality—a challenging task. BASE® works with clients daily to offer a variety of Health Reimbursement Arrangement (HRA) options that help ease this burden and fit their business structure, budget, and health insurance needs.

For employers without employees, the BASE® Section 105 HRA allows small business owners to deduct up to 100% of healthcare costs, including health insurance premiums and qualified out-of-pocket expenses, as a business deduction. This HRA is ideal for self-employed individuals who can hire their spouse and classify as a Sole Proprietor, Partnership, C Corp, or S Corp.

For employers with employees but no group health plan, BASE® offers the Qualified Small Employer HRA (QSEHRA) and the Individual Coverage HRA (ICHRA). The QSEHRA allows small business owners to reimburse employees for qualified health insurance premiums or healthcare expenses, suitable for employers with fifty or fewer full-time employees and no group health plan. The ICHRA enables employers of all sizes to reimburse employees for qualified insurance premiums and/or non-insured healthcare expenses, providing flexibility to offer benefits to all employees or specific classes.

For employers with a group health plan, the BASE® Integrated HRA helps lower health insurance premiums while maintaining employee coverage. This HRA is designed for employers looking to reduce the cost of their group health plan and supplement employees’ deductible costs.

As health insurance premiums continue to rise, BASE® is dedicated to helping employers succeed by offering creative, money-saving benefit strategies and compliance solutions. To learn more about HRAs, contact BASE® at 888.386.9680 or visit www.BASEonline.com.

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BASE® has been offering small business owners Section 105 HRA administration for well over 25 years.  With each passing year and increasing healthcare expenses, that means the average tax savings a client experiences continues to increase. 

The average client now saves an average of over $7,200* in tax savings on healthcare with the BASE® Section 105 HRA.  This plan is designed to allow small business owners the opportunity to deduct up-to 100% of healthcare costs, including qualified individual insurance premiums and qualified out-of-pocket medical expenses.

According to the latest figures from the US Bureau of Labor Statistics (BLS), as of October 2024, the number of self-employed people in the US is 9.84 million.  While this number continues to go up and down, the average tax savings our clients gain only continues to go up.

Our tax, insurance, financial advisor partners continue to encourage their small business and family farming clients to utilize this plan to go beyond the IRS-approved tax savings plan created through Code Section 105 of the Internal Revenue Code that allows business owners the opportunity to deduct these expenses as a business deduction.

Around since 1954, this type of HRA was granted Safe Harbor in the Affordable Care Act (ACA) for businesses with 1 employee.  BASE® provides adjudication of expectations and the legal documentation needed for filing taxes.

If you work with small business clients or are one yourself, be sure to reach out to BASE to discuss this plan.  You can also estimate your savings by utilizing the Tax Saving Calculator by visiting BASEonline.com.

* Average based on employer with a full-time employee working 25+ hours per week.

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