Employers embracing ICHRAs to empower employee health coverage decisions
One lesson of the pandemic is that employees want more control over the features and cost of their health insurance. This is the principle behind…
One lesson of the pandemic is that employees want more control over the features and cost of their health insurance.
This is the principle behind the individual coverage health reimbursement arrangement, or ICHRA. Under this model, employees shop for their own individual insurance plan and are reimbursed by their employer. The government began working on the rule that would create ICHRA in 2017 and released the final rule in June 2019. Employers are quickly embracing the option, with a 219% increase in the number of organizations that signed up to offer an ICHRA in the second half of 2020 compared to the first half of the year, according to new data from PeopleKeep.
Related: ICHRA has potential to reshape the way employers pay for benefits
The ICHRA fills in the gaps for employers looking for a benefit that more closely resembles group health insurance but has the advantages of the reimbursement model. PeopleKeep, which provides HRA administration software, points to several benefits for employers:
Employer mandate compliance. Employers can use the ICHRA to satisfy the employer mandate of the ACA.
Employer cost control. Employers define a fixed budget, or an allowance, that works for the business without worrying about carrier-driven annual rate increases. There are no caps on allowances, so employers can offer as much as they want.
No minimum contribution requirements. Employers can choose the allowance amount that works within their budget without being told they have to contribute a minimum percentage of each employee’s premium.
Employee classes. Employers can offer a health benefit to a subset of their employees and offer employees different allowance amounts based on 11 different employment criteria. No participation requirements. Employers don’t have to pressure employees to participate in the benefit just so they will meet the plan’s participation requirements.
Employee choice and portability. Employees gain access to many more plan options by shopping on the individual market and buying their own plans, making them fully portable regardless of their employment status.
“There are major benefits for both parties,” PeopleKeep concluded in a report. “Employees are empowered to shop for their own plans that they can then take with them when they leave their employer, while employers gain control over their costs, streamline the budgeting process by making their costs more predictable and remove the administrative hassle of dealing with group health insurance plans.
“Employers considering the ICHRA should focus on creating a stellar employee experience from the very beginning, from notifying and educating them on their new benefit, to helping them evaluate and buy their insurance plans, to providing ongoing assistance for expense reimbursement.”
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