Unraveling the ICHRA dilemma: Innovations in health care benefits management

As U.S. employers seek innovative ways to provide their employees with greater control over their health insurance choices, Health Reimbursement Arrangements (HRAs) have emerged as a popular solution.

Among these, Individual Coverage Health Reimbursement Arrangements (ICHRAs) have seen a staggering growth of nearly 350% since their inception in 2020, reflecting a broader trend of market expansion for all HRAs.

ICHRA is a new type of health reimbursement arrangement that allows employers to reimburse employees for qualified medical expenses, including insurance premiums, on a tax-free basis. The reimbursement amounts can vary based on the employer’s design.

What sets ICHRAs apart is their accessibility to employers of all sizes, offering a flexible and customizable solution to meet diverse employee needs.

With the advent of ICHRA comes an influx of companies, eager to assist employers and their employees in managing ICHRA accounts, selecting health plans, and administering billing and payments to carriers. This innovative model has significantly expanded the landscape of health care benefits, providing a customizable approach to employer-funded health care.

Backend banking, compliance, and patchwork payment solutions

Initially, ICHRA administrators managed their responsibilities using rudimentary tools like Excel spreadsheets and outdated file processes for accounting, reconciliation, and payment processing.

However, as the ICHRA landscape grew to encompass an estimated 400K-500K participants—with the potential to reach millions more and handle tens of billions of dollars in annual premium payments—the need for scalable, efficient banking and payment operations became glaringly apparent.

The complexity and scale of managing such vast amounts of money and participants highlighted the inadequacies of these basic systems, driving the search for more sophisticated solutions.

To meet the growing demand for scalable solutions, administrators have begun adopting models to streamline the integration of scalable banking and accounting systems, as well as offering debit cards for ICHRA premium payments.

However, this innovative approach faces significant hurdles. ICHRA administrators often resort to piecing together solutions from non-specialized backend vendors, which may lack the necessary expertise to adequately support the intricacies of the health care benefits space.

These vendors sometimes treat employer-funded and owned ICHRA accounts as individual banking accounts for employees, leading to compliance issues for ICHRA administrators. Balancing the need for flexibility with the imperative of compliance has emerged as a central challenge for administrators.

Harnessing digital tools for enhanced security, customization, and advanced payment processing

The future of health care wallets hinges on using digital transformation tools effectively to boost efficiency and revenue when managing Individual Coverage Health Reimbursement Arrangements (ICHRA). When selecting a tool, prioritize compliance, security, customization, and advanced payment processing capabilities. This simplifies the user experience, making it easier for employees to manage their health care benefits from a single integrated platform.

Security and compliance: With security and compliance recently overlooked in the health care benefits sector, choosing a solution that prioritizes the latest security protocols is imperative. This protects sensitive data and financial transactions, adhering to the stringent health care regulations governing ICHRA accounts. These tools safeguard participant data and ensure legal compliance while also instilling confidence in administrators to navigate regulatory complexities.

Related: Unlocking ICHRA: 3 questions to revolutionize your employee benefits strategy

Customized payment experiences: Flexibility is key in payment experiences for both consumers and administrators. Whether integrating virtual or physical debit cards or designing personalized health care wallets, these tools provide the building blocks for intuitive and efficient payment systems. This level of customization extends to benefit administration, simplifying the management of health care expenses for employers and employees alike through user-friendly interfaces.

Advanced payment processing: As the landscape of health care wallets evolves, comprehensive ICHRA tools empower administrators to centralize the management of various health care benefits. By consolidating ICHRA funds, Health Savings Accounts (HSAs), and employer stipends into a unified platform, administrators streamline benefits administration and utilization. This enhances organizational efficiency and encourages consumer engagement, optimizing their use of health care benefits.

By seamlessly integrating these elements, digital tools become indispensable assets in navigating the complexities of managing ICHRA. They unlock new levels of efficiency, compliance, and user satisfaction, meeting the evolving expectations of customers in the health care benefits sector.

Matthew Renfro, Co-Founder & CEO, Lynx