Under an Individual Coverage Health Reimbursement Arrangement (ICHRA), employers decide which expenses are eligible for reimbursement. You may choose to reimburse:
- Individual health insurance premiums only, or
- Both premiums and qualified medical expenses (as defined by the IRS)
Your elections must be documented in your ICHRA plan documents and communicated to all eligible employees.
Option 1: Reimbursing Premiums Only
Many employers elect to reimburse only monthly individual health insurance premiums. This keeps administration simple and ensures that the ICHRA is used strictly to support coverage costs.
How Premium-Only ICHRA Works
- The employee signs up for their healthcare plan through BEN360, and monthly premium reimbursement is automatic.
- Benafica/BEN360 processes the reimbursement according to your plan rules.
- If the employee’s premium is less than the monthly ICHRA allowance, any unused funds remain with the employer.
Option 2: Reimbursing Premiums and Qualified Medical Expenses
Employers may expand their ICHRA to cover both premiums and IRS-qualified medical expenses. This provides greater flexibility to employees and may help offset out-of-pocket healthcare costs.
Qualified medical expenses are defined by the IRS. Employers and employees should refer to:
IRS Publication 502: Medical and Dental Expenses
(This publication provides the full list of eligible and ineligible medical expenses under IRS rules.)
Examples of qualified medical expenses include:
- Deductibles and co-insurance
- Office visit co-pays
- Prescription medications
- Certain over-the-counter medications
- Eligible dental and vision services
- Certain medical equipment and supplies
(Always defer to IRS Publication 502 for definitive guidance.)
How Reimbursements Work When Medical Expenses Are Allowed
When your ICHRA includes both premiums and medical expense reimbursement:
- Premiums are reimbursed first each month.
- Any remaining allowance may be used for eligible medical expenses.
- The employee must submit a separate reimbursement request for each medical expense.
Documentation is required for every claim and must clearly show:
- The name of the provider
- The date of service
- A description of the service or product
- The amount paid
Benafica/BEN360 will process the claim according to IRS substantiation rules.