Predictable employer costs and coverage transportability are just the tip of the iceberg.
Change is afoot in the insurance world. Rules enacted in 2019 spawned a new iteration of employer-sponsored health insurance: Individual Coverage Health Reimbursement Arrangements (ICHRAs).
You can think of ICHRAs as the health insurance equivalent of 401(k) plans (which transformed employer-sponsored retirement savings). That is to say, with this new offering employers can reimburse employees for their insurance costs rather than purchasing policies for them.
The process typically looks like this: 1. An employer designs an ICHRA, with a range of options tailored to meet its needs and those of its employees; 2. employees choose a plan; and 3. employees submit paid expenses to employers for reimbursement. (Expenses might include premiums, claims or both, depending on the design of the ICHRA.)
Whether the shift toward ICHRAs will be as tectonic as the shift to 401(k)s remains to be seen. But there are many reasons to think it might. From an employer’s perspective, the main benefits of ICHRAs include:
- Reduced and predictable costs: ICHRAs allow employers to set a reimbursement rate that means they never have to pay more.
- No minimum participation rates: Fully insured plans often require 50% or 75% participation; ICHRAs do not.
- Less onerous benefit administration: ICHRAs shift the burden of managing benefits to the employee.
- Something rather than nothing: Some small employers would like to contribute to employees’ health insurance costs but can’t afford traditional fully insured plans. ICHRAs provide a way to provide some help.
- Different solutions for different classes: ICHRAs allow an employer to move certain classes of employees into the individual market. This may allow the employer to provide coverage, or better coverage, to certain classes.
Likewise, employees will find a lot to like about ICHRAs, such as:
- Choice: A healthy, single 25 year old has different needs than a 45 year old with children or someone with a chronic condition. ICHRAs give employees the choice of tens, or even hundreds, of health plans, allowing them to find one that best matches their needs.
- Transportability: ICHRAs make it possible for individuals to leave an employer and still keep their plan. The more ubiquitous ICHRAs become, the more likely it will be that an employee could keep their plan over time.
- Broader range of covered costs: ICHRAs can be used to pay for certain approved medical expenses in addition to premiums.
Of course, the extent to which ICHRAs become the common currency of employer-sponsored health insurance will dictate their effect on carriers, brokers, insurtech operators and other interested stakeholders.
For a deeper dive into the subject—including potential obstacles to widespread ICHRA adoption—download our latest Ideon Report: The ICHRA Revolution—A New Model for Employer-Sponsored Health Insurance