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When ICHRAs Make Sense for Clients
Thanks to their flexibility, benefits, and potential to serve businesses of all sizes, Individual Coverage Health Reimbursement Arrangements (ICHRAs) are a good fit for all kinds and sizes of companies. Below are some of the most common reasons companies consider an ICHRA — and why you might recommend them.
Unaffordable coverage or large annual increases.
ICHRAs can make health plans more predictable and affordable in three key ways:
- Employers can set their pre-tax contribution amount so they know what their expenses will be from one year to the next.
- There are plan options for every budget, so employees can choose what’s right for them.
- The risk pool for individual marketplace plans includes millions of people, offering more cost stability than a risk pool the size of a single business, which can be vulnerable to health events and claims in an employee population.
A diverse and/or geographically distributed workforce.
It’s obvious, but important: employees are in different life stages, they have different medical needs, different budgets, and different preferences for doctors and networks. And if the client’s team is spread across multiple states, a single carrier might not be strong in all locations. Group insurance doesn’t address these challenges well, but ICHRAs empower employees to choose plans based on their unique needs and locations.
Recruiting and retention advantage.
ICHRAs provide individual choice that group plans can’t match. Employees will have more options across multiple carriers to fit their unique healthcare needs. And clients who are offering health benefits for the first time gain the opportunity to reward staff with a pre-tax benefit.
Employees are happy with ICHRAs, too. In one study, 94% of people reported being as satisfied or more satisfied after switching.
Managing risk among employees is difficult.
With traditional group insurance, costs are closely tied to the health and claims of your client’s workforce — making budgeting unpredictable. ICHRAs change that. Because the risk pool is not tied directly to your client’s company, their premiums are not directly impacted by the health and lifestyle choices of employees. And staff is still able to take advantage of wellness and rewards programs offered by their health plan carrier.
The client would like to optimize wages.
ICHRAs have been shown to provide cost savings for employers and employees alike, allowing dollars to go further. For the employer, savings can be channeled into wages or other benefits programs that help attract and retain a strong workforce. Plus, by saving employees money on health insurance (depending on their plan choice), they get to keep more of their paycheck.
They want flexibility among employee classes.
Employees can be assigned to one of 11 different classes within an ICHRA. This allows an employer to make higher contributions for classes facing higher healthcare costs, and make lower contributions for classes with lower healthcare costs. As a broker, you can help guide them through the process of setting up classes to best meet the needs of the employee population.
They need compliance and compatibility.
ICHRAs are designed to comply with the employer mandate of the Affordable Care Act, provided certain affordability conditions are met. ICHRAs are also compatible with:
- HSAs
- FSAs
- Medicare Supplemental Plans
Explore Other ICHRA Topics for Brokers
Talk With Our Team
Considering an ICHRA raises new questions. Our team is here to help.