As if insurance lingo was not quirky enough—PPO, HMO, ACO, EOB, PCP, etc.—now this? Before you get too frustrated, ICHRA may just be the answer for employers struggling with insurance administrative burdens and high costs. Remember, if you’re not ahead of the game, that means you’re behind and your competition might just steal your precious income.
What exactly is ICHRA? Individual Coverage Health Reimbursement Arrangement (ICHRA)—whew, that’s a mouthful so we will just stick with ICHRA (“ick-rah”). In June of 2019, the U.S. Departments of the Treasury, Health and Human Services (HHS), and Labor finalized new regulations to expand the usability of HRAs. This emerging concept of the ICHRA model is based on reimbursing employees for insurance rather than purchasing it for them. The biggest benefit? ICHRA allows employers to reimburse employees tax-free for individual health insurance or Medicare.
HHS and the Centers for Medicare and Medicaid Services (CMS) project that by 2029, roughly 800,000 employers will offer ICHRA, covering more than 11 million employees. This is a projection we should all pay very close attention to.
ICRHA may be a good option for employers struggling to provide affordable coverage, who no longer wish to administer complex group health benefit plans, who are considering dropping their group plan, who want to “baby-step” into the world of benefits (i.e., start-up companies), who want to cover normally ineligible classes of employees (i.e., part-time workers), or those who are not meeting participation guidelines.
ICHRA provides budget control by implementing fixed costs and eliminating future rate increases. The responsibility of the employer for health risks is now transferred to the employee and there are no participation rules. Employees have the flexibility to choose coverage that best fits their needs and their plans are portable no matter where they go. The premiums reimbursed by the employer are tax free to both the employee and the employer and the plans are still serviced by an insurance professional who ensures that the set-up, administration, and compliance issues are properly addressed at all times.
But there are two sides to every story right? There may be some downsides to these types of plans. Although the individual market is slowly returning and more options are available today than in the past few years, network issues, plan benefits, and the impact to any possible subsidies must be carefully considered. There are a number of compliance and tax issues as well, many of which may require a third-party administrator to handle. These are just a few of the situations that a professional benefits consultant will still need to appropriately guide their clients through.
In any productive needs analysis situation, there are many important considerations, from the overall goals of the employer, to budgets, to unintended repercussions to employees, and more. If you would like to explore these new options further, consult your Cornerstone representative today.
