Better Benefits
Individual Coverage HRA’s (ICHRA) – A New Way for Employers to Pay for Medical Insurance
Individual Coverage HRA’s (ICHRA) – A New Way for Employers to Pay for Medical Insurance
Rising health care costs are making it increasingly difficult to maintain a comprehensive benefit plan for a multi-generational workforce.
Industry statistics indicate that approximately 25-30% of single coverage participants and 55-60% of families reach their deductible each year, resulting in a majority of employees not utilizing the full scope of the benefits being offered today.
As a result, employers are left paying for a one-size fits all plan design that leaves benefits and costs on the table each year. Individual Coverage HRA’s (ICHRA) could offer a creative and flexible option to help control an employer's spend on a group health plan.
The “Individual Coverage HRA” rules began in January 2020 and expand existing Health Reimbursement Arrangement (HRA) regulations to allow the pre-tax reimbursement of individual health insurance premiums. An ICHRA combines an individual health insurance plan paid for by the employee with reimbursement by the employer at a defined, pre-determined rate.
While the ICHRA is considered a group health plan, the actual insurance an employee purchases is separate and distinct from the ICHRA. Similar to a group health plan, employers create eligibility guidelines, define contributions, establish reimbursements and provide employee education throughout the enrollment process.
As a condition for using an HRA to reimburse individual coverage premiums, an employer must:
- eliminate traditional health care coverage and
- direct employees to secure individual coverage in the open market.
In order to implement and administer this solution, employers will also need to create a synergy between their payroll provider, an HRA third-party administrator and various insurance carrier distribution channels for their local and out-of-area employees.
In today’s competitive market, there is no one-size-fits-all approach to controlling healthcare costs. While an ICRHA can potentially offer a creative and flexible solution, there are many things to consider for your business and employees before you implement this solution.
Reach out to a OneDigital consultant to evaluate this strategy or as part of your multi-year strategy. For more on this topic read this article exploring Creative Medical Plan Designs and Funding Options to Avoid Passing Costs on to Employees.