Are ICHRAs just the latest employee benefits trend, or are employers starting to see them as a viable offering for their employees?
An Individual Coverage Health Reimbursement Arrangement (ICHRA) is an employer-sponsored benefit where employers set a pre-tax defined contribution level for employees to enroll in individual health plans. ICHRAs have been around since 2020, but have really gained traction as rising healthcare costs are forcing employers to evaluate new solutions.
As we’ve taken a pulse across the industry, there are many reasons we’re excited about ICHRAs.
- Unsustainable costs trend: healthcare costs continue to rise and the medical trend is unsustainable for many employers. ICHRAs reduce large year-over-year increases by putting employers in charge of setting reimbursement levels.
- Employee flexibility: employees each face individual healthcare needs, and ICHRAs allow employees to select individual plans that best address their current circumstances.
- Carrier engagement: some medical carriers have previously avoided ICHRAs due to the perceived impact on their fully insured business, but many are becoming open to integrating with ICHRA administrators as interest grows in ICHRA across employer segments. Carrier integrations will improve plan enrollment and overall employee experience.
Although we’re optimistic about the future of ICHRA, there are a few potential roadblocks or areas for improvement that brokers and employers should continue to watch. Regulatory changes to the Affordable Care Act (ACA) could impact ICHRA plans, although this seems unlikely given ICHRAs were initially launched during President Trump’s first term. Employee plan selection decision support technology remains important as employees transition from a few curated plan designs to many individual plan options, and they don’t always have the health literacy to know what best fits their needs. The addition of plans that offer individual coverage across multiple states in the coming years will also be a huge benefit to employees who travel often or have out-of-state dependents.
If you’re a health plan, benefits administrator, insurtech, brokerage consultant, or HR professional, ICHRA will probably be part of the dialogue for the foreseeable future.
Danielle Crosswell | Senior Associate