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By now, you’ve probably heard of individual coverage health reimbursement arrangements, or ICHRAs. These products have been available as a coverage option for employers since the beginning of 2020, but interest and uptake has increased over time.
ICHRAs allow employers to reimburse employees a predetermined amount of tax-free money each month to pay for health coverage purchased in the individual/family market, as well as other out-of-pocket medical expenses. Here’s what you need to know if you have client groups that might benefit from ICHRAs:
ICHRAs can be used by small groups, but they also work for large groups that have to comply with the ACA’s employer mandate.
As long as the ICHRA benefit amount is sufficient to make individual market coverage affordable for employees, the employer mandate will be satisfied if a large group opts for an ICHRA instead of group health coverage.
(In 2021, coverage is considered affordable if the ICHRA will result in the employee paying no more than 9.83% of household income for self-only coverage under the benchmark plan offered in the marketplace.)
Thanks to cost-control and simplified administration, ICHRAs can appeal to businesses that have previously avoided health benefits altogether. They may also appeal to business owners looking for a way to reduce the headaches and costs associated with their current group plan.
If your focus is individual market coverage, you may have had little opportunity to work with these businesses in the past. A strong understanding of ICHRAs and the benefits they can provide to employers and employees will give you a new opportunity to open discussions with these businesses.
ICHRAs allow employers to offer a hassle-free benefit while giving employees the freedom to select from among any of the health plans available in their local individual market. Depending on the location, that could mean dozens of plan choices — far more than an employer could provide via a regular group health benefit. This makes it easier for each employee to select the coverage that best fits their needs, even among a diverse group of employees.
Starting in 2019, insurers began joining or rejoining the individual market and the health insurance marketplaces, after quite a few exits in 2017 and 2018. That trend of increasing insurer participation in the individual market continued in 2020 and 2021, and we’re seeing even more insurer participation on deck for 2022 coverage.
Several insurers, including Aetna/CVS Health, UnitedHealthcare, Bright Health, and Friday Health Plans are expanding their coverage areas or jumping into new markets. The same is happening around the country with numerous regional carriers. If you are not contracted with these carriers, you can get contracted through Independence Brokerage Group (IBG). When you are contracted through IBG, you own your business, retain 100% of the writing agent compensation and writing agent carrier bonuses, have access to a free ACA quoting and enrollment site for on-exchange ACA enrollments and will have access to a no-cost ICHRA quoting platform. Get the contracting process started.
This means that employees in many areas will have access to a wider range of provider networks and benefit designs in the individual market, even compared with what they might have had just a few years ago.
Wages are increasing across the country as employers struggle to fill positions. An ICHRA could be a great fit for a business that doesn’t currently offer health coverage and wants to create a better benefits package in order to attract and retain talented employees.
But it’s important to understand how ICHRAs affect premium subsidies in the marketplace, as this might affect the decision-making process for the business owner:
Group health insurance has participation requirements and employer contribution requirements. But these are not an issue for ICHRAs.
Employers can decide which classes of employees are eligible for ICHRAs, and the employees are free to accept or decline the benefit as they see fit. And there are no upper or lower limits on how much an employer can contribute to ICHRAs (but if the business has 50+ employees and is subject to the ACA’s employer mandate, they’ll need to contribute enough for the ICHRA to be considered affordable coverage).
If a group health plan has a localized provider network, it may not be useful to remote employees who live far from the rest of the group.
But geographical location is one of the classifications that employers can use to determine eligibility for an ICHRA. This allows a business to offer an ICHRA to employees who live in different locations. The remote employees can then select an individual market plan that’s available in their area, providing them with access to a local provider network that they wouldn’t otherwise have.
ICHRAs are attractive to employers that are looking for ways to offer hassle-free health benefits without breaking the bank. Voluntary benefits are a great way to supplement an ICHRA, as they help to provide additional coverage for employees, without additional costs for the employer.
Things like accident supplements, dental and vision coverage, and disability and life insurance are valued benefits for employees. This is true even if the employee pays 100% of the cost, since the cost of voluntary group benefits will still be lower than it would be if the employee had to obtain these benefits on their own.
So if you’re marketing ICHRAs to employers and you also work with voluntary group benefits, this is a great opportunity to incorporate both in order to help employers build a robust benefits package.