This article is about Justworks PEO and Payroll. What product am I using?
What is an ICHRA?
An Individual Coverage Health Reimbursement Arrangement (ICHRA) is an alternative to group health insurance where employees buy their own individual health plans, and employers reimburse them tax-free for premiums and other eligible medical expenses.
How do health insurance reimbursements work at Justworks?
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Choose a budget.
Select a monthly allowance that works for your business and adjust it annually as needs change. You can tailor budgets by team, location, or employment status so everyone gets coverage that makes sense. And if employees don’t use the entire amount, leftover funds can go towards eligible expenses like contacts or therapy. -
Employees pick plans.
Your team members choose an individual health plan that will cover their doctors, prescriptions, and personal needs, and you avoid the pressure of deciding for everyone. -
We handle the rest.
We’ve partnered with Thatch to take care of the setup, reimbursements, compliance, and reporting. They’ll also guide employees through open enrollment and help them narrow down their choices, so you’re not stuck playing middleman.
What are the benefits of offering a health insurance reimbursement?
An ICHRA offers a different approach to benefits that may work better for certain teams. It can be a good fit if you want more flexibility in who you cover, fewer constraints like group participation requirements, and a way to keep costs more predictable — while still giving employees the freedom to choose plans that work for them. Their plans are also individually-owned, so employees can keep them even after they leave their job or the ICHRA terminates.
How are ICHRAs different from traditional group health plans?
Group plans are purchased, selected, and administered through an employer, with employees enrolling in a plan the company chooses. With an ICHRA, the employer sets a monthly, tax-free allowance, and employees use it to purchase their own individual health insurance — choosing plans that best fit their needs, location, and doctors.
You can switch coverage types as your needs change, starting with individual plans and moving to group plans later, or vice versa. Justworks makes it easy to adapt over time, with all coverage options in one place. Your annual renewal period is a good time to re-evaluate your options and see if an ICHRA is right for you.
Justworks and Thatch
Who is Thatch and what do they do?
Thatch is our integrated partner for administering ICHRAs. While we handle payroll and deductions, they handle setup, eligibility, contributions, assistance with reporting and compliance, and employee guidance. While everything is initiated through Justworks, employees will go to Thatch for questions and support related to their coverage—so your team gets expert help without the extra admin burden.
How much does it cost to offer a health insurance reimbursement?
Justworks customers get discounted rates from Thatch. It is only $25 per enrolled employee per month with no extra compliance fee, billed directly by Thatch. In addition to the $25 PEPM fee, you will choose an allowance that comfortably fits within your budget for the employer-funded portion of the ICHRA.
What is the Thatch Marketplace?
The Thatch Marketplace lets employees use any remaining allowance (after paying their health insurance premiums) on health and wellness services curated by Thatch, like mental health support, preventive care, and fitness. Employees can also use leftover funds on other qualifying medical expenses outside the marketplace.
Eligibility
Which companies are eligible for health insurance reimbursements?
C Corporations, B Corporations, S Corporations, Partnerships, and LLCs are all eligible for ICHRA. In the case of S Corporations, Partnerships, and LLCs electing passthrough taxation, the employer entity can offer ICHRA to employees who aren’t owners of the entity (owners are defined as anyone owning more than 2% of the entity).
Which employees are eligible for health insurance reimbursements?
Employers have the flexibility to set eligibility criteria. ICHRA benefits are only available to W-2 employees who are actively on an employer's payroll. Contractors or individuals who aren't formal employees aren't eligible to participate.
Employers can segment their workforce into IRS-approved classes and offer different allowances to each class, including: full-time vs. part-time, salaried vs. hourly, or different geographic locations. If you offer ICHRA to one employee in a class, you must offer it to all employees in that class.
Note that ICHRAs do not operate in Hawaii, and this prevents Thatch and Justworks from supporting employees located there.
How do these reimbursements affect eligibility for pre-tax savings like HSAs and FSAs?
Depending on how your ICHRA is set up, it can affect eligibility for pre-tax accounts like Health Savings Accounts (HSAs) and Flexible Spending Accounts (FSAs).
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HSA eligibility
Employees can stay HSA-eligible if their ICHRA reimburses premiums only and they’re enrolled in a high-deductible health plan (HDHP). If the ICHRA also reimburses out-of-pocket medical expenses, employees are no longer eligible to contribute to an HSA.
To help prevent unexpected tax issues, employees who select HSA-eligible plans via Thatch will have reimbursements limited to premiums only by default. If they don’t contribute to an HSA during the plan year—or once they meet their deductible—they can request to enable reimbursements for additional medical expenses by emailing support@thatch.ai.
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FSA eligibility
Employers can offer FSAs alongside ICHRA at their discretion.
Can I set a waiting period for employees on Thatch?
Yes. Employers have the option to institute a 30 or 60 day waiting period for newly hired employees to access their health benefits on Thatch.
Can I offer group plans for some employees and ICHRA for others?
No. With Justworks, you choose one plan model—ICHRA or group plans—for all eligible employees. Offering both at the same time isn't supported, but we’ll work with you to figure out
Enrolling and Setup
How do I set up my health insurance reimbursement?
Starting July 1, learn more and enroll in your Justworks Benefits Center. Once you click “Get Started,” you'll be redirected to Thatch, where you can follow the prompts to create an account, connect to our payroll, confirm your company information, and authenticate your bank account. Lastly, you’ll invite eligible employees to create their Thatch accounts and enroll in health insurance, and Thatch will send information directly to them with next steps!
What are key dates to keep in mind?
Enrollment windows
You choose how long employees have to enroll—typically 2 weeks, but it can also be 3 weeks, 30 days, or 60 days. During this time, employees can use their invitation link to create an account and select a plan. Thatch sees best results when employees are invited to enroll during the first two weeks of the month, for a coverage effective date the first of the following month.
Coverage effective dates
Individual health insurance coverage always begins on the first day of the month after enrollment and cannot be backdated. If an employee enrolls in the last two business days of the month, their coverage will begin on the first of the following month. For example, if an employee enrolls on April 20, their coverage would start on May 1. If they enrolled April 30, their coverage would start on June 1.
Plan year and renewals
Your allowance strategy stays fixed for the plan year to meet compliance requirements. The plan year runs from your program start date through December 31, and resets on January 1, when any updates to your approach would take effect.
How do I choose a monthly allowance?
Choosing your monthly allowance depends on your budget, your team, and how competitive you want your benefits to be. Thatch uses your employee data to guide your setup and keep you aligned with ACA requirements. You can also decide whether to include dependent coverage and whether employees can use leftover funds (after premiums) for eligible medical expenses.
There are two common approaches:
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Flat allowance
Set the same monthly amount for all eligible employees, making it simple to manage and costs easy to predict. Often a good fit for smaller or more centralized teams. -
Smart allowance
Allowances adjust based on factors like age, dependents, and location. This uses real plan cost data to help benchmark contributions, so employees have more consistent purchasing power across your team. This approach is often better for distributed teams or those with a wider range of ages.
No matter which approach you choose, employees can select a plan that costs more than their allowance. If they do, the difference is automatically deducted from their Justworks paycheck.
Where can I see employee enrollment details?
Your administrator dashboard in the Thatch platform provides an overview of your employees’ onboarding status, benefits start date, monthly costs, and monthly allowance. Here you can manage processes like inviting new hires and offboarding employees from their ICHRA benefits.
Benefits Management
How does billing work?
Billing is handled directly by Thatch in two parts: employee healthcare costs and a monthly administrative fee. Thatch bills your company around the 15th of each month based on your employees’ expected premium costs for the upcoming coverage period. If a plan costs more than an employee’s allowance, the difference is automatically deducted from their Justworks paycheck. In addition to healthcare costs, you’ll be charged a $25 fee for each employee who enrolls in Thatch, billed at the beginning of each month.
All billing details can be viewed in the Billing section of the Thatch dashboard, including company-level summaries and per-employee breakdowns. You may also see adjustments (like back payments, plan changes, or credits) reflected in your reports.
Note: As the policy holders, employees may still receive invoices from their insurance carrier. Thatch handles premium payments, so these can be safely ignored.
Do employees need to pay out of pocket and wait to be reimbursed?
No, if employees enroll through Thatch, Thatch pays the carrier using the employer-funded allowance so employees don’t front the premium. If the plan costs more than the allowance, the employee share is handled via payroll deduction. If an employee keeps an external plan, they pay the carrier directly, either using the Thatch card (including autopay) or another payment method and then request reimbursement through Thatch.
What support does Thatch provide to employees and new hires?
Once you invite your employees to Thatch, they will enroll in health insurance and become thepolicyholders. As the broker and administrator for the medical plans, Thatch will work directly with your employees to manage their plans efficiently and ensure premiums are paid. If employees need assistance to select their plans, they can schedule a video call with their team of licensed brokers from the Help & support button in their onboarding dashboard.
How do I offboard employees?
Employees you deactivate in your Justworks payroll system will have a “Payroll Deactivated” status on the Employees page of your Thatch dashboard in ~24 hours. Account administrators will then receive an email notification of this status change and should follow Thatch’s steps to complete the offboarding. You do not need to wait for this notification though, and you can offboard employees from Thatch as soon as you know when their benefits should end.
How does COBRA work?
If your company is subject to federal COBRA requirements, you can offer continuation coverage for your ICHRA through Thatch. When an employee is offboarded, you’ll set their benefits end date in Thatch, and they will then send the required COBRA notice directly to the employee, including details on how to continue their coverage and what it will cost. For additional details, refer to Thatch’s COBRA guide.
What is the renewal process for health insurance reimbursements?
Unlike group plans, there is no carrier plan selection at the company-level. Instead, you control your budget yearly, and Thatch helps employees re-shop plans annually to find the best value without disruption. Your team can also easily auto-renew with zero action. Thatch will reach out directly when the time comes.
Where can I go for more questions?
We’re here to support you! If you want to talk through your insurance options and see if health insurance reimbursements are right for you, contact Justworks. To learn more about Thatch, check out their help center.
If you are already enrolled in ICHRA via Thatch, contact them for troubleshooting, billing, or eligibility questions. If your team is coming to you with questions about Thatch, please don’t hesitate to direct them to support@thatch.com. They are welcome to keep you cc’d if they’d like.
What happens if I leave Justworks?
If your company leaves Justworks, you can continue offering health insurance reimbursements through Thatch directly. If you decide to stop the offering, your employees can choose to continue their health plan and pay for the premium out-of-pocket. Please reach out to support@thatch.com to notify them of the change, discuss your options, and clarify next steps.