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ICHRA: An Rx for Medical Insurance

by Chris Shipley, Vice President, Employee Benefits

 

Today’s employees want more freedom to choose a benefits package-including medical- that meets their individual and family health and lifestyle needs. Employers, especially in today’s economy, desire programs that reduce costs, offer more control and predictability, and simplify administration. Bridging these seemingly opposite needs is a new approach, especially during a time when health care spending is rising in the U.S. more than anywhere else in the world, as recently reported by CNBC. The answer: an Individual Coverage Health Reimbursement Arrangement (ICHRA). 

Available since 2020, an ICHRA allows an employer to offer medical coverage and other benefits without participating in a one-plan-fits-all group medical contract. The employer simply reimburses a set monthly amount for medical coverage, allowing each employee to select the plan, benefits and network they prefer. ICHRAs also can be designed to allow employees to purchase additional benefits, such as dental, vision and life insurance.  

Companies of every size can implement an ICHRA, but the product is particularly appealing for small businesses that sometimes lack the resources to administer a traditional plan. ICHRAs can be offered to all employees or a specific group, with the latter especially useful if insurance costs vary among a company’s locations. Employers also may establish a separate ICHRA to cover a portion of health insurance costs for part-time employees, helping attract and retain these essential workers in today’s tight labor market. [/vc_column_text][/vc_column][/vc_row]

ICHRA Benefits:

  • Control the predictability of medical insurance costs
  • Employee freedom of choice
  • Ability to offer all employees or select employees groups
  • Significant reduction in plan administration
  • Reimbursements that are tax deductible for the employer and tax free for the employee
  • Opportunity to expand benefit offerings beyond medical insurance
  • Enhanced employee acquisition and retention
  • Streamlined employee onboarding process

Reducing Complexity and Cost 

The traditional medical insurance market is extremely complex, with numerous insurers offering multiple coverage levels with varying copays, coinsurance, deductibles and age-related rates. Selecting one plan is difficult, implementing and managing it is cumbersome and having it meet the needs of all employees is unrealistic. Adding to the administrative burden are constantly changing plan designs, which force employers to hit the repeat button on the selection and enrollment processes each year. 

With an ICRA, employees are responsible for selecting and securing their own plan, giving them exactly what they want and relieving the employer of considerable time and paperwork.  

A qualified insurance advisor can provide a tailored end-to-end ICHRA solution. At Henderson Brothers, for example, our new, proprietary HBSelect ICHRA product starts with a feasibility analysis that evaluates an employer’s cost and administration requirements. Through extensive, customized, modeling, we determine what employees would pay for a benchmark plan in a specific geographic region and then suggest an appropriate reimbursement amount based on the employer’s financial situation.  

An ICHRA also allows employers to accurately plan for future expenditures by eliminating the unpredictability of annual premium cost increases. Unlike traditional group plans, the employer – not the insurer – controls the annual cost increase by determining a monthly reimbursement level that is affordable and sustainable.  

One of the true benefits of the HBSelect platform is the ability for companies to seamlessly offer other traditional employee benefit programs such as disability coverage, life insurance, dental and vision. Further adding to the appeal is that the platform also allows employers to offer voluntary lines of coverage such as accident, critical illness, hospital indemnity, ID theft, legal, and pet insurance. All benefits that are in high demand by employees in a post pandemic environment. The employer may choose to subsidize these benefits, or employees can obtain them using either excess reimbursement funds or their own money, via payroll deductions. Employees seeking such benefits enjoy the engagement of a third-party call center and benefits administration platform for product information, enrollment assistance, and claim and billing issues, relieving the employer of these administrative tasks.  

A Win/Win Solution 

With many companies, especially small to mid-sized employers, looking for ways to continue offering quality medical insurance and comprehensive benefit packages to their employees without becoming bogged down by rising costs, constantly changing plans and time-sapping administration, an ICHRA is a win/win solution. Employees gain freedom of choice, while employers control costs, simplify processes and eliminate administrative headaches.  

Act Today

Whether you are a business owner or head of human resources, take action today by learning more about ICHRA options in your area. Give your employees the freedom of choice they need and deserve while creating more predictability and control over your medical costs. 

 

 


Please note that the information contained in this posting is designed to provide general awareness in regard to the subject matter covered. It is not provided as legal, medical, or tax advice, nor is it intended to address all concerns in your workplace or for public health. No representation is made as to the sufficiency for your specific company’s needs. This post should be reviewed by your legal counsel or tax consultant before use.