Individual Coverage Health Reimbursement Arrangements (ICHRAs) are a new type of health reimbursement arrangement in which employers of any size can reimburse employees for some or all of the premiums that the employees pay for health insurance.
Employers can reimburse employees tax-free for individual health insurance, including coverage purchased on federal or state-sponsored health insurance exchanges, the individual markets, or Medicare.
And under federal rule changes in 2019, ICHRAs can be structured to fulfill the employer mandate under the ACA that requires most organizations to offer “affordable coverage" for employees.
Under the Biden Administration, there’s been stepped-up enforcement of ACA provisions, and employers who weren’t cited for ACA violations in the past are now finding themselves under scrutiny — and will for the foreseeable future.
Meanwhile, healthcare costs continue to rise and many employees, particularly the younger and lower-paid, have opted out of employer-sponsored plans because of the expense.
As a result, ICHRAs are increasingly being seen as an alternative to traditional, employer-sponsored health insurance. According to Kaiser Family Foundation and the Purchaser Business Group on Health, 48% of surveyed business owners are considering an ICHRA.
Although ICHRAs are popular among small employers, large employers represent the fastest-growing segment, with a 210% rise in enrollments over the last year, according to Take Command Health data.
Why Consider an ICHRA?
- Eliminate claim risk and cost unpredictability. Fixed employee contributions allow employers to budget and manage costs more effectively.
- Reduce the administrative burden of designing and managing a group health plan. Employees select the carrier and plan that best meets their needs.
- Offer health benefits to part-time and hourly employees. Attract and retain part-time and hourly employees by offering them ICHRA with flexible employer contributions.
- Meet ACA employer mandate requirements. Avoid ACA penalties.
What to Consider
There are no absolute guidelines determining if an organization should offer ICHRAs as an option or in lieu of traditional insurance. In many cases, an ICHRA may not be the best fit for an organization and its employees or may actually be more expensive than traditional health insurance.
Here are key points to consider:
- What are your objectives? Lowering spending on health benefits is one objective but shouldn’t be the only one: it’s also important to consider reducing claims trends and increasing participation rates.
- Can an ICHRA meet compliance requirements? The issue is whether an employer can meet compliance requirements in offering an ICHRA option, such as meeting the affordability requirement under the ACA. Expert insight is usually essential in determining compliance.
- How do I Administer an ICHRA? You will need a solid technology platform solution to facilitate the administration. Compliance, employer and employee tools are key components of a solid solution.
- Are employees on board? An ICHRA may increase participation and lower costs for the organization, but the transition from group to individual insurance is a big change for everyone. Communication and employee education are essential to ensure a smooth experience.
ICHRAs are a viable alternative to group health benefits for some organizations and employees that may not be able to afford it otherwise. Understanding all aspects of an ICHRA; financial, compliance, technology, and carrier/plan availability in the market, is critical to its success.
JP Griffin Group, a division of HUB International, is well educated on all components in order to assist you in making the right decision for your organization.