Even if you offer multiple health insurance plans, trying to address the diverse needs of employees can seem impossible. Budgeting for unpredictable group rate renewal increases can be equally challenging. Thankfully, an innovative alternative, like Individual Coverage Health Reimbursement Arrangements (ICHRAs) could be the solution. ICHRAs flip the script on how employers offer health insurance. Instead of trying to accommodate all employees with a few plans, employers can offer ICHRAs to defined classes of employees. This provides more freedom and flexibility to employees while stabilizing costs for employers, allowing them to offer coverage to employees in ways that otherwise wouldn’t be feasible. In the right situation (and with the right partner), ICHRAs can offer more advantages and cost savings than other options, including multiple carriers and networks, expanded plan designs, copays and deductibles, and more predictable budgeting processes.
Flexibility and Accessibility for Employees, Cost Savings, and Stability for Employers
ICHRAs were created under the federal Affordable Care Act (ACA) regulations and made available to employers in 2020. In this relatively new arrangement, employees choose their own carrier and health plan directly or can use the federal marketplace. This offers many more choices compared to the two or three plans employers typically offer. Employers can then contribute to the health reimbursement arrangement in order to reimburse their employees fully or partially for their insurance premiums. These plans also satisfy ACA requirements for coverage. Since each ICHRA plan rate is based on an individual, annual renewal increases are smaller and more predictable — typically 1%-3%.
Other group health plans tend to have larger annual renewal increases since the carrier needs to factor in a range of high and low claim groups. By adding ICHRAs, you can serve all your employees’ diverse healthcare needs and still offer them ancillary benefits such as vision, dental, and voluntary benefits.
What Type of Organization Can Benefit Most?
The flexibility of ICHRAs can benefit employers in a variety of situations. They can be a great option for small business employers who otherwise couldn’t afford to offer coverage. They can also benefit larger organizations with diverse or changing employee needs. Employers can even offer ICHRAs to seasonal, part-time, temporary, or hourly employee classes. Usually, these types of employees wouldn’t be eligible for health benefits; however, this added perk could be a defining factor in attracting employees.
ICHRAs can also address challenges with geographically diverse workforces. Consider a large organization that offers benefit plans utilizing a local network for employees at their headquarters. This company, however, also has a facility in another state with employees who wouldn’t be able to access those local network providers. One solution would be adding a high-cost PPO option or an additional carrier to accommodate out-of-network needs, creating two more plans and renewals. In this case, the employer could offer ICHRAs only to the employees at that facility, allowing those employees to choose their preferred plan and network while still receiving the subsidy benefit. This reduces costs for both the employer and employees. For any organization, ICHRAs reduce the pricing volatility associated with self-funding and fully funded plans. This includes the liability for the high claims of self-funding and the high, unpredictable renewals of fully funded plans. In this way, ICHRAs can make health insurance costs lower and more predictable.
How To Make ICHRAs Work for Your Organization Offering ICHRAs
This method requires a bit more upfront effort to implement. Fortunately, proper communication, education, and one-on-one meetings can ensure success. In order to provide your employees with the right guidance to personalize their ICHRA plan, use a dedicated employee benefits advocacy team or specialized ICHRA provider. In a one-on-one meeting with an employee, an advocate can assess their needs, research plan options on the employee’s behalf, and present them with a few manageable options where they can choose their own carrier and plan design.
Crucially, according to federal regulations, employers can’t offer the same type of employees a choice between a group health plan and an ICHRA. Make sure your plan follows federal rules and offers affordable coverage. Request hands-on support from your broker to help you offer ICHRAs to your employees. In the right situation, ICHRAs can provide an ideal solution to common benefits problems at a lower cost to employers and employees than traditional coverage options. This allows transparency and freedom of choice for employees’ benefits selections.
Stephen Horvat is Vice President and Senior Benefit Consultant at Corporate Synergies. He can be reached at (610) 994-7033 or via email at stephen.horvat@corpsyn.com.
