5 things to know about ICHRAs

Individual coverage health reimbursement arrangements are a growing trend. But because it’s a relatively new model of healthcare, there are aspects of the plan that many organizations—and employees—aren’t sure about.

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HRE’s Health & Benefits Leadership Conference will dive into ICHRAs, how they work and how to implement them during a panel running on April 6 and April 7. (Register for the event here.)

Ahead of the session, here are five things to know about ICHRAs.

They’re a new model of care. The coverage option was established through a rule issued by the Trump administration in 2019. It went into effect in 2020.

With an ICHRA, business owners determine a set budget to reimburse their employees for health insurance, and workers choose the plan that works best for them. Some employers also reimburse for medical expenses. Employers then “design” their HRA. They can choose to divide by class, or scale rates by family size and age—which is the most common, explains Jack Hooper, CEO of Take Command, an ICHRA administrator based in Dallas. Employees then buy their own individual health insurance plan and are reimbursed through their paycheck.

ICHRAs are trying to solve for a number of problems. The model is “helping to fix a broken system from multiple angles,” says Hooper. It can help drive down the cost of healthcare and can encourage employees to be active, informed consumers with “skin in the game.” It also can support small businesses in combatting the unpredictable cost hikes and participation woes of group plans.

It can offer unique employer benefits. For employers already offering group plans, ICHRA allows employers to effectively get out of the risk management game, Hooper says. “For those new to benefits altogether, it’s an affordable way to get started offering quality benefits to your team and it can scale as you grow,” he says, adding it can provide cost control since, whereas group premium prices go up every year, HRA allowances are predictable and set.

Significantly, ICHRAs can provide help for small employers and their employees: Among small employers (under 50 employees and that aren’t required to offer coverage), 80% of employers offering ICHRA/QSEHRA are offering benefits for the first time.

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ICHRAs aren’t for every organization. There are some downsides to embracing the model. For instance, if workers are all on subsidized health insurance, offering an ICHRA could potentially disrupt employees’ ability to receive tax credits. Plus, Hooper explains, if the company is in a location that doesn’t have a strong individual health insurance market, ICHRA might not make sense as “the success of ICHRA is hinged on a competitive and innovative individual health insurance market.”

They are growing. ICHRAs are on the rise. According to Kaiser Family Foundation and the Purchaser Business Group on Health, 48% of surveyed business owners are considering an ICHRA.

Although the arrangements are popular among small employers, large employers represent the fastest growing segment for ICHRA, with a 210% rise in larger employer enrollments over the last year, according to Take Command Health data. Half of these are in blue collar services.

“In the future, we expect to see an increased awareness from the employer community, continued support from both sides of the political aisle, continued growth on our platform and growing recognition among benefits professionals that ICHRA is a great option for some of their clients,” Hooper says.

The biggest hurdle to growth? Lack of awareness. “We believe 95% of businesses who would be a great fit for ICHRA still haven’t heard of it,” he says.

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Kathryn Mayer
Kathryn Mayer is HRE’s former benefits editor and chair of the Health & Benefits Leadership Conference. She has covered benefits for the better part of a decade, and her stories have won multiple awards, including a Jesse H. Neal Award and honors from the American Society of Business Publication Editors and the National Federation of Press Women. She holds bachelor’s and master’s degrees from the University of Denver.