What Are Eligible Expenses for an ICHRA

An eligible expense for an ICHRA must meet three key criteria to qualify for reimbursement:

When

Expenses must generally be incurred during the ICHRA plan year to qualify for reimbursement. However, under the Administrative Convenience Rule, premiums for health insurance coverage beginning during the plan year may be reimbursed—even if paid before the plan year starts.

Employers may define when a premium expense is considered incurred using one of the following methods:

• The first day of each month of coverage on a pro-rata basis.
• The first day of the period of coverage.
• The date the premium is paid.

This flexibility ensures that employees can be reimbursed for substantiated premiums tied to coverage during the plan year, simplifying administration and aligning with IRS guidelines.

Who

The expense must be incurred by one of the following eligible individuals:

• The employee.
• The employee’s spouse.
• The employee’s child (26 years old or under).
• The employee’s tax dependent.

What

ICHRAs cover expenses defined under IRS Section 213(d), but employers have flexibility to decide which of these expenses are eligible for reimbursement.

Section 213(d) Expenses

The IRS defines medical expenses under Section 213(d) as amounts paid for:

• Health insurance premiums (e.g., individual ACA-compliant plans, Medicare Parts A, B, C, and D).
• The diagnosis, cure, mitigation, treatment, or prevention of disease, or expenses for affecting any structure or function of the body.
• Transportation for medical care, including mileage, bus fares, taxis, and ambulance services.

The definition of medical expenses under Section 213(d) is intentionally broad. In practical terms, they include:

• Out-of-pocket medical expenses (e.g., deductibles, copays, coinsurance).
• Prescription medications.
• Over-the-counter medicines (e.g., cold and flu remedies and menstrual care products).

Certain expenses are specifically excluded:

• Cosmetic procedures (e.g., elective surgeries).
• General health and wellness products (e.g., vitamins, supplements, and non-prescribed items).

Employer Flexibility

Employers can customize their ICHRA to include only the categories of expenses they want to cover, tailoring the plan to their budget and employees’ needs.

Guide to Salusion’s ICHRA: Setup, Rules & Employee Benefits

Watch our 12-minute video guide on Salusion’s ICHRA to understand setup, administration, compliance, and employee engagement—plus tools to estimate costs and ensure ACA compliance

Salusion Learning Center | ICHRA & QSEHRA ResourcesSean Grettum

What Is an ICHRA? Your Starting Point for Tax-Free Benefits

Learn how an ICHRA helps businesses reimburse employees for medical expenses while offering tax savings and flexibility

Learning CenterSean Grettum

What Are the Mechanics of an ICHRA? Reimbursements Explained

Learn how an ICHRA plan year works, including reimbursements, benefit limits, and unused allowances.

Learning CenterSean Grettum

Which Employees Are ICHRA Eligible? Your Guide to Requirements

Find out who qualifies for an ICHRA, including employee classifications and coverage requirements

Learning CenterSean Grettum

What Is an ICHRA Class? Define Your Employee Groups Now

Understand ICHRA employee classes, compliance rules, and how to structure benefits across different groups

Learning CenterSean Grettum

ICHRA Compliance: What’s Required? Your Complete Guide

Ensure ICHRA compliance with plan documents, employee notices, proof of coverage, and IRS tax reporting rules

Learning CenterSean Grettum

ICHRA Tax Reporting: What Forms & Deadlines? Your Guide

Understand ICHRA tax reporting rules, including Forms 1094, 1095, and key IRS filing deadlines for small employers and ALEs

Learning CenterSean Grettum

How ICHRAs Affect Premium Tax Credits

Learn how ICHRA benefits affect your eligibility for Premium Tax Credits, when to opt out, and how to stay compliant when filing with the IRS.

Salusion Learning Center | ICHRA & QSEHRA ResourcesSean Grettum