How can we improve ICHRAs?
A new study offers up three changes to improve ICHRAs, either through regulation or statutory changes made by Congress.
Individual coverage health reimbursement arrangements (ICHRAs), which authorize employers to subsidize individual coverage that workers purchase on their own, have made little headway in New York, according to a new study by the United Hospital Fund. Although they took effect last January, which was too late for many employers’ open enrollment, they are an option for this enrollment season, said Peter Newell, director of the fund’s Health Insurance Project.
ICHRAs are similar to other HRAs, such as health savings accounts, in that they allow employers to set aside funds to reimburse employees for expenses related to health care. In the case of ICHRAs, however, no account is actually established; instead, employer groups allocate funds for each employee, and then employees submit claims to employers (or administrators) for reimbursement, with the reimbursement amounts not taxed as income for the workers.
Related: 5 FAQs about the next big thing in benefits: Individual coverage HRAs
“As a new open enrollment period is about to begin for employers, interest in ICHRAs could increase,” Newell said. “Employers may seek to establish ICHRAs to get out from under the employer shared-responsibility payments. Certainly, the federal agencies (and vendors) continue to beat the drum about ICHRAs, pushing out written materials regularly and holding monthly promotional webinars. They estimate that about 11.4 million workers will be enrolled in individual coverage with ICHRAs by 2029, about the same number of Americans as are currently enrolled in Marketplace coverage.
“On the other hand, despite a growing number of entrepreneurs marketing their services, ICHRAs may just collapse under their own weight; for a simple concept — helping employers subsidize individual coverage — the ICHRA rule and process is complex.”
Newell recommends three changes to improve ICHRAs, either through regulation or statutory changes made by Congress:
- Grant essential plan enrollees an automatic right to opt out of ICHRAs without an affordability test.
- Allow individuals to receive both ICHRAs and APTCs if they are eligible for both.
- To discourage the wholesale replacement of ESI with ICHRAs, limit the option to small employers or condition large employers’ exemption from the employer responsibility provisions on providing as much as a typical employer would contribute to a comprehensive group plan, rather than the current minimum affordable ICHRA standard.
“These three simple changes would establish ICHRAs as a tool that helps address shortcomings in the ESI market and the ACA, rather than undermining them,” Newell said.
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