In recent years, there’s been a significant shift in how large employers approach employee health benefits. Rather than turning straight to a group plan, many companies are exploring individual coverage solutions. In fact, according to a survey by the Kaiser Family Foundation and the Purchaser Business Group on Health, 58% of business owners are considering an ICHRA, or individual coverage health reimbursement arrangement.
So, what is an ICHRA? An ICHRA is a type of employer-provided health benefit plan that allows employees to choose their own health insurance coverage and receive reimbursement from their employer for a portion of the premiums. An ICHRA offers more flexibility and customization for both employers and employees, and can reduce costs for both parties.
"ICHRAs have been seen and understood as a solution for small businesses, but what we have found is that it's an even better solution for large businesses because the individual coverage options are community rated and not subject to the employer's previous group claims experience, employee health conditions or underwriting." — Laura Clement, SureCo Benefits Expert
1. Increased Flexibility
Traditional group health insurance plans typically take a one-size-fits-all approach. But it’s an approach that rarely works best for anyone, especially in today’s remote work environment. Large employers with geographically distributed workforces often have a hard time finding coverage that works for employees who are located in multiple states. ICHRAs allow employees to choose any plan from any carrier in their area, meaning workers can find a plan that best fits their needs no matter where they’re located. This freedom of choice also ensures that employees with specific medical conditions or those who are experiencing certain life stages (e.g., those with young children or those approaching retirement) can find something that works for them.
2. Significant Cost Savings and Price Predictability
Another factor driving the shift to ICHRA is cost savings. By offering an ICHRA, employers can reduce their healthcare spending while providing quality employee benefits. This is because an ICHRA allows employers to set a specific budget for their employee benefits, which is then used to reimburse employees for their individual insurance premiums. This budget can be adjusted annually, making it easy for employers to predict and control costs. Employer contributions are made pre-tax and, depending on how the ICHRA is implemented, can be funneled through payroll, giving businesses a traditional group insurance experience. The employees' plans are no longer tied to claims, lowering the cost for everyone involved.
3. Compliance With ACA Requirements
ICHRAs also help Applicable Large Employers (ALEs) comply with the Affordable Care Act’s (ACA) Employer Shared Responsibility Requirements that mandates employers to offer minimal essential coverage that is affordable to their employees or face penalties for not doing so. By offering an ICHRA, large employers can ensure that they are meeting all ACA requirements and avoiding costly penalties.
"ICHRAs allow businesses to focus on what they do best—serve their customers. Employers no longer have to spend time navigating complex health benefit designs and dealing with double-digit annual rate increases. In most cases, ICHRAs increase worker options for health insurance coverage and allow workers to shop for ACA-compliant plans in the individual market and select coverage that best meets their needs. Adopting an ICHRA also makes workers’ coverage more portable and reduces the administration burden to employers.” —John Jenkins, SureCo Compliance Manager
4. Attract and Retain Top Talent
Finally, the shift to an ICHRA can also been driven by a desire for large employers to improve employee satisfaction. Retaining and attracting top talent has always been challenging, but it’s even harder in today’s competitive job market. Benefits can make a huge impact. The Society of Human Resource Management (SHRM) found that 56% of U.S. adults with employer-sponsored health benefits said that whether they like their health coverage is a key factor in deciding to stay at their current job, and 46% said health insurance was either the deciding factor or a positive influence in choosing their current job. By giving employees the freedom to choose their insurance coverage, employers can ensure that their employees have access to the benefits they need.
The shift to ICHRA is a significant trend in the employee benefits landscape, especially for large employers. The ICHRA solution offers numerous benefits to both employers and employees. Whether you're looking to reduce your healthcare costs, allow employees to gain more control over their benefits, or want to eliminate hours of administration tasks while staying compliant, ICHRA is worth considering.
If you're interested in learning more about ICHRA, talk to a SureCo benefits expert today.