ICHRAs, or individual health coverage reimbursement arrangements, are an attractive option for large and mid-market employers who want to offer more health benefit plans while containing costs. If you're new to ICHRAs, allow us to give you a crash course.
ICHRAs are an opportunity for employers to broaden their benefit offerings. An alternative to traditional group health plans, ICHRAs let employers reimburse workers a set dollar amount to spend on the individual plan of their choosing. It removes the pain point of renewals from the corporate HR equation and empowers employees to select healthcare coverage that best fits their personal needs.
But considering ICHRAs only came into effect in 2020, there are still myriad misconceptions about them.
So let’s distill fact from fiction…
FICTION: ICHRAs are only for small businesses.
FACT: Regardless of the size of an organization, any employer can offer an ICHRA.
The intent behind ICHRA was to create another healthcare option that would give employers—big and small—more control over their benefits costs. It also aimed to offer employees a wider scope of healthcare plans to choose from. Now, ICHRAs are gaining traction among enterprise corporations. In fact, according to a 2020 Health Care Delivery Survey, 20% of large employers plan to or are considering offering ICHRAs to at least some portion of their active employees. SureCo is helping drive this trend by providing a turnkey ICHRA solution for business with 100+ employees.
FICTION: ICHRA plans are not ACA compliant.
In order to meet the ACA’s Employer Mandate, 95% of a company's full-time (or full-time-equivalent) employees must be offered what the ACA deems “minimal essential coverage.” By design, the system has made this foolproof. All major medical plans available on the individual market satisfy this requirement. On top of that, plans must meet an affordability threshold, which will vary by household and location. That’s where SureCo comes in. SureCo ensures that employers contribute enough to each individual employee’s premium to satisfy this part of the ACA requirement.
FACT: ICHRA plans have built-in ACA compliance.
FICTION: If you offer an ICHRA to one class of employees, you must offer it to everyone else.
FACT: ICHRAs were purposely built to offer flexibility to all parties involved.
Employers can designate one or multiple “classes” of employees to whom they will offer an ICHRA. That is, employers can opt to offer ICHRAs exclusively to full-time or part-time workers, or to salaried, hourly or seasonal workers. The caveat? The terms under which the ICHRA is offered must be uniform across that class. Reimbursement amounts, however, can differ based on factors such as employee age or location.
FICTION: ICHRA plans are found on the healthcare.gov exchange.
FACT: ICHRA plans can be found on the direct-to-carrier market.
One of the benefits of ICHRAs for employees is that it gives them access to a broad range of health plans. They can shop on heathcare.gov or via a state-based marketplace, all of which are considered “on-exchange.” But They can also shop for a plan “off-exchange,” which is what SureCo offers. These are effectively direct-to-carrier marketplaces. SureCo’s Enrollment Platform can streamline the selection process for employees. Our technology automates data across the benefits ecosystem to provide employees with all competitive health insurance options according to their location.
FICTION: Employees can receive a premium tax credit, or subsidy, if they are enrolled in an ICHRA.
FACT: It is illegal to receive a subsidy if you are enrolled in an ICHRA.
The reimbursement received from employers effectively cancels out the possibility of premium tax credits or subsidies for employees enrolled in an ICHRA. But the reimbursements made to ICHRA-enrolled employees are tax-free for the employer.
FICTION: ICHRAs cost businesses more money than traditional group plans.
FACT: SureCo has helped companies save an average of 20% by switching to an ICHRA.
ICHRAs provide employers with a more cost-effective alternative to traditional group health plans. Reimbursements made to employees are tax-deductible for employers. Plus, ICHRAs give employers more control over the annual dollar amount they spend on employee health benefits when compared to the unexpected renewal rate hikes that come with traditional group plans. So one employee with a major medical issue no longer had the potential to cause the insurance carrier to label an entire pool of employees as a high-risk group, driving up renewal rates. Instead, ICHRAs disperse the risk.
FICTION: ICHRAs have a negative connotation.
FACT: ICHRAs need to be explained clearly.
Employees are as susceptible to the myths about this coverage option as their employers. That’s largely due to the fact that ICHRAs are still quite new. The reality is that employees enrolled in an ICHRA aren’t limited to the few traditional health plans that their employer is locked into. Like their employer, employees enrolled in an ICHRA also have greater control over how much they want to spend on a health care plan. ICHRA’s don’t require employee participants to contribute a set dollar amount on their coverage. So they can choose plan that costs the equivalent of their employer’s reimbursement and spend nothing. They can also opt for a more comprehensive plan to which they would additionally make an out-of-pocket contribution. Plus, depending on the ICHRA that an employer selects, employees may also have access to tax-free health savings accounts to pay for medical expenses other than premiums.
FICTION: ICHRA plans provide inferior coverage to traditional group plans.
FACT: Individual plans can be equally as robust and comprehensive as group plans.
Most employers offer a very limited number of traditional group plan options. Available options may not necessarily meet the health care needs of an employee and/or his or her family. For the employee, it’s an all or nothing scenario; they can buy into an available group plan or go without. With ICHRAs, employees have the power to select from a wider variety of health plans, depending on their location and budget.
FICTION: ICHRA is a product of the Trump administration and aims to limit coverage to employees.
FACT: ICHRA was passed through bipartisan efforts to make health insurance more accessible for employers and employees alike.
SureCo launched a multi-year lobbying campaign to bring ICHRAs to market because we recognized that companies needed to reduce the exorbitant costs associated with health benefits while employees need a more personal approach to selecting a health care plan. But we aren’t the only ones to recognize that the U.S. healthcare model hasn’t evolved since World War II. It was a true bi-partisan effort that led to the creation of ICHRAs. Both sides of the aisle recognize that both employers and employees need greater control over the cost of health care as well as access to a larger variety of plans. That’s why we offer more than 9,000 plans from over 140 trusted carriers.
FICTION: ICHRAs are a nightmare to administer.
FACT: With the right third-party administrator, ICHRAs can actually help HR teams reduce administrative burden.
By joining forces with SureCo, corporate HR teams are free to shift their focus from the concerns that come with renewals to functions that directly support the business, including employee training and development. We have the capabilities to integrate with more than 150 HRIS and payroll systems to provide the same seamless experience that traditional group offers employers. Even better, SureCo will take the lead in onboarding and enrolling employees in their new health care programs. Our white glove service ensures employees understand the product and know how to choose the right plan for their needs.