5 ICHRA challenges brokers face (and how to overcome them)
While the individual coverage health reimbursement arrangement (ICHRA) is emerging as a viable solution for navigating escalating health care costs, benefits advisors are still exploring the best ways to articulate their value.
1. Offering an ICHRA limits my ability to influence plan design.
While new and different can sometimes feel synonymous with a lack of control, it can actually be quite the opposite in reality. Given the newness of ICHRAs, most offerings are built on sophisticated, tech-forward platforms that deliver advisors the tools they need to be successful while eliminating inefficiencies. From a plan design perspective, gone are the days of time-consuming spreadsheets, manual calculations, and checking with your compliance team for approval. Instead, advisors can redirect their energy toward higher-value activities, influencing how plan selection fits into the larger business strategy. By identifying an advisor-friendly ICHRA provider, benefits advisors can do more than just remain relevant; they can positively impact everything from quoting and contribution strategies to supplemental coverage and employee engagement, thus delivering meaningful value by way of savings and support.
2. ICHRAs are only for small companies (<50 FTEs).
When ICHRA passed in 2020, one of the core advantages was that it allowed companies of 50 employees or more to meet their ACA requirements by providing workers with tax-preferred funds to buy coverage on the individual market. And while ICHRAs have become incredibly popular amongst smaller companies where escalating health care costs can be particularly debilitating, the significant savings it can offer to larger companies makes it equally alluring.
In addition to savings, ICHRAs deliver other benefits for growing companies as well. Not only does it get them out of the risk business, but larger organizations often struggle with carrier enrollment minimums which get eliminated with ICHRAs.
ICHRAs have also proven a successful strategy for growing companies with distributed workforces. As remote work becomes more mainstream, companies leveraging ICHRAs will no longer be restricted by a single group plan that keeps everyone in one network. Instead, remote employees will be allowed to select plans that work for them regardless of their corporate headquarters location.
3. ICHRAs can be an administrative headache.
Why yes, they can! Which is why it is imperative to find the right ICHRA platform to support all administrative needs. ICHRA administration involves setting up the right allocation model while ensuring funds are appropriately pulled each month and paid to the carrier. The right provider can make this feel quite similar to that of a group plan, in that individual premiums are debited from employees’ payroll, and then total premiums are paid in aggregate from the employer to the carrier via virtual credit cards.
But there’s obviously more to administration than just payments. Employers are accustomed to having a heavy hand in onboarding new employees, overseeing plan engagement, monitoring transactions, and more. It is important to find an ICHRA partner who can deliver this same level of transparency through extensive reporting and data-driven insights, along with the tools necessary to engage with employees through open enrollment and beyond.
4. Exchange plans aren’t high quality.
Before diving into this, it is important to really think through the definition of quality. If you truly believe that everyone with health care coverage is a high user requiring platinum-level plans, then ICHRA might not be the best solution for you. But if you appreciate that a minority of patients consume a disproportionate amount of health care and that many employees are currently overpaying for coverage they may not need, then it’s worth reading on.
ICHRAs allow people to rightsize their plans by selecting exactly what they need versus a one-size-fits-all offering. Not everyone requires a zero deductible PPO plan (though there are many of those on the Exchange!). In fact, according to Zorro’s 2023 plan statistics, only 4% of employees selected a platinum plan, 33% gold, 28% silver, and 35% bronze. And by saving money on premiums, both employees and their employers can redirect those funds toward more impactful benefits, be it ancillary offerings, higher salaries, business investments, or otherwise.
5. Companies will struggle to recruit great talent if they don’t offer traditional group plans.
With the right plan, ICHRAs can actually be a recruiting tool! In addition to the pay increase employees typically receive due to lower monthly premiums, employees are often drawn to the customization and portability of ICHRAs. With increased attention on the individual market in the past 10-plus years, people have become even more comfortable with individual insurance and the autonomy that comes with it.
ICHRAs can also be a valuable recruiting tool for part-time employees. Thanks to ICHRA classes, companies can actually reimburse coverage for part-time employees, even if it’s at a lower rate than full-time employees. Ultimately, this can create even greater loyalty (read: less turnover!) and save the company more money in the long run.
Perhaps the most notable challenge ICHRAs have overcome is recognition across the market. If an exhibit hall packed with ICHRA vendors and the numerous ICHRA sessions didn’t convince you, perhaps the statistics will. Last year, ICHRA adoption grew by 171% among U.S. workers. That opens up a world of opportunity for benefits advisors. Aside from employer predictability and savings, as well as employee personalization and control, ICHRsA gives benefits advisors a chance to disrupt the trajectory of continuous premium hikes while delivering plans their clients can be proud of.