America's Benefit Specialist January-February 2023

THE BENEFITS, AND DRAWBACKS, OF ICHRAs

By Connor Sir Client Executive Holmes Murphy Minneapolis, Minnesota

As the circumstances and technicalities behind healthcare coverage become even more intricate, it’s increasingly im portant that employees have options that can best fit their unique needs and situation. While organizations have a lot to consider when it comes to employee benefits, one newer model has been a game changer. Individual Coverage Health Reimbursement Arrange ments became an option in 2020, presenting an alternative solution to traditional plans by allowing employers to use HRA funds to reimburse individual premiums with pre-tax dollars. Historically, employers could only integrate these HRAs with a traditional group health plan arrangement. NAVIGATING THE EXCHANGE AND SELECTING THE BEST-FITTING PLAN CAN ALSO BE A CHALLENGE FOR EMPLOYEES.

ICHRAs offer an innovative model wherein employees buy their insurance directly from the individual market instead of utilizing a traditional employer-offered group plan. With this, employers have an ACA-compliant offer of coverage that is not underwritten, which can often mean more flexibility both administratively and financially. Among the advantages of choosing an ICHRA model is a transfer of risk on the part of the employer, especially for those that have low participation or poor claims experience in their group health plan arrange ment, likely contributing to higher renewal increases year over year. When employees are given the autonomy to choose their plan from the exchange, much of the responsibility is shifted to the employees themselves. Especially now, freedom and flexibility to choose from the entire insurance marketplace can be a benefit for employees looking to tailor their benefits to their needs and budget. Since premiums are not based on the health of the organization’s group or claims experience, rates under ICHRAs are simply based on geographic location and their age at the time of enrolling. Additionally, employers that have premiums that trend significantly higher than the

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