Three ways ICHRAs can help control costs

The cost of offering health insurance has continued to rise year after year. Employers are often faced with a difficult balance: providing the most optimal coverage options for employees, while needing to contain costs. Benefits are also an important recruitment tool, so companies are often challenged with balancing coverage options against the bottom line.

Brokers can be an important resource for their clients in this area. New to the marketplace in 2020, individual coverage health reimbursement arrangements (ICHRAs) are an employer-funded, tax-advantaged health benefit used to reimburse employees for individual health insurance premiums and other qualified medical expenses. ICHRAs are revolutionizing the industry – so much so that I’d argue they’re the future of health benefits.

Here are the three ways brokers can empower their clients with ICHRAs:

• ICHRAs allow employers to cover more of their team

Rather than continuing to only propose traditional health insurance plans, brokers willing to explore ICHRAs with their clients can provide broader coverage options for a more diverse workforce. For example, part-time, seasonal, gig workers and anyone else who fits into one of 11 employee classes defined by ICHRA regulations may now qualify for benefits when they hadn’t in the past.

• ICHRAs offer cost predictability

An ICHRA is centered on a reimbursement model (sometimes referred to as a defined contribution approach) and costs can more easily be accounted for during annual planning. Let’s say an employer decides a defined contribution amount of $500 a month per employee is the right fit; the employer can then budget $500 multiplied by the number of eligible employees and know the maximum amount they’ll be spending on insurance premiums for the year. The cost of a traditional group plan is much less certain, based on the claims activity of the group’s employees, and has been trending higher year-over-year despite coverage levels remaining the same.

• It’s easier to select, offer and manage an ICHRA

Technology makes it easier than ever to offer ICHRAs. There are simplified experiences that offer an end-to-end benefits platform that makes it easier for brokers to help their clients control costs, and potentially save significant money.

And while ICHRAs are still relatively new, I’ve seen companies and their employees save thousands by making the move to this type of group health plan.

Let me share a recent example.

A top 10 insurance broker saved a client and its employees significant money by moving away from a traditional group health plan and introducing an ICHRA. This particular company is in property management and operates in four states with a total of 170 employees. With an ICHRA, the broker helped the company lower the overall premium costs by more than 54%. Additionally, employees had greater freedom of choice when it came to their coverage, choosing 33 different coverage options from seven different carriers. Everyone was happy at the end of the day, and it’s easy to see why!

It’s time to shake things up and to gain control over the year-over-year rising price of insurance for your clients. ICHRAs have done just that. And while change isn’t always easy, the cost savings I’ve seen from companies introducing ICHRAs speak for themselves. Stand apart from your competition and demonstrate that you’re an industry leader by introducing ICHRAs to your clients.

About John Kelly:

John Kelly’s singular passion is to finally and permanently streamline the entire health benefit experience — bringing it into the 21st century and leading it beyond as the industry evolves. He’s the Founder and CEO of Nexben, offering the first end-to-end technology platform that connects all aspects of the benefits industry.