It’s not news to anyone in the HR and benefits spaces that healthcare costs are rising: According to a 2022 Willis Towers Watson study, global costs were expected to jump 10% this year, marking a 15-year high—and driving more than three-quarters of insurers to anticipate price hikes.
That reality is one of the drivers of the growth of ICHRAs (Individual Coverage Health Reimbursement Arrangements), said a panel of ICHRA experts at Thursday’s Health & Benefits Leadership Conference.
ICHRAs—in which employers provide employees a set, monthly dollar figure (tax-free) for employees to purchase their own healthcare coverage from a Qualified Health Plan—give employers the control to set the budget but give employees more control, and more options, when it comes to designing their own healthcare, says Robin Paoli, executive director of the HRA Council.
“ICHRAs are a federal, legal vehicle for employers to do what they have wanted to do for years: Can’t I just give my employees money to buy their own health insurance? So, they can have the healthcare they want for themselves and their dependents? That’s what we’ve got here,” she says.
Is an ICHRA right for me?
While QSEHRAs (Qualified Small Employer HRAs), rolled out in 2017, are for employers with 50 or fewer employees, ICHRAs, launched in 2020, are available to employers of all sizes.
Paoli said that from 2020-22, ICHRA adoption tripled—and grew by 10 times among Applicable Large Employers.
“Among large employers, adoption is skyrocketing,” Paoli says.
Cost is a particular factor—the Council members agree that they frequently see employers considering moving to ICHRAs after carriers hike fees at renewal time each year; one attendee in the HBLC session said her employer’s carrier is increasing plan prices by more than 50%.
Jack Hooper, CEO and founder of TakeCommand Health, says employers that move to an ICHRA save an average of 10%-20% on healthcare costs, though he has seen some save as much as 50%.
Apart from price, ICHRAs allow employers to offer a more personalized design—on par with the overall push for personalization in benefits design.
“What ICHRA allows is a new way to approach benefits,” Hooper says. “Instead of picking a plan to give to everyone, you can think of it like a 401(k); you can say, ‘We’re going to give all employees $500 or $1,000 and make something really custom-tailored and well-suited for the organization and your workforce.’ ”
Employees, particularly Gen Z and millennials, want to be more engaged in their benefits, adds Victoria Glickman Hodgkins, CEO of PeopleKeep Inc., and an ICHRA gives them that opportunity.
“They expect a lot of autonomy, personalization,” she says. “Everything else in their world works that way.”
Also fueling a push toward ICHRAs for some are modern workplace realities: Workers are distributed across locations, and workplaces include a mix of full-time and part-time, salary and hourly employees—all with varying benefits needs.
“Trying to cover everyone on a group plan is really inefficient,” Hooper says. “A better solution gives employees the money and lets them buy on the local market and get the coverage and the doctors they want.”
Strategizing for an ICHRA
If employers are considering moving to an ICHRA, one of the first steps needs to be design plan, particularly setting a budget. With an ICHRA, employers can set different monetary amounts for different groups of employees, based on 11 factors, such as where employees work.
As employers shift from the “employer control to employer contribution” model, it’s important they work with the growing community of professionals who assist with ICHRA design, says Noah Lang, CEO and founder of Stride Health, and offer support for their employees. Stride helps employees insured through an ICHRA make decisions about their healthcare.
Instead of just one plan, employees may have 30 to consider, which he says can be a “massive fear factor.”
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“There’s not only a ton of choice [on the ACA market], there is high-quality coverage with essential health benefits. The fact of the matter is the ACA market is growing and healthy, and carriers are building better plans,” Lang says. “But, do they need help? Yes. And benefits decision-makers need help. This is a different market than group benefits.”
Don’t wait for renewal time to start considering the move, the panelists agree.
Ask your benefits broker to research the costs for an ICHRA, alongside group plan costs, Lang suggests.
“Get the comparisons—and do it early,” he says.
“It’s worth running the numbers to see,” Hooper adds. “Thousands of employers have found ICHRAs to be a great solution.”