by Shanique Yates
September 25, 2024
Through the ICHRA plans, employees receive a set amount from employers each month to be used toward their plan of choice on the individual insurance market.
Some employers have begun adopting a new way for employees to save money on healthcare costs. This new individual coverage health reimbursement arrangement, or ICHRA plans option, gives them the cash and option to choose the best plan for their household and has slowly begun deploying at workplaces nationwide.
Through the ICHRA plans, employees receive a set amount from employers each month to be used toward their plan of choice on the individual insurance market. According to employers, the plan gives workers more control over their health spending and, in some cases, helps them save money, too, NPR reports.
With the cost of health insurance steadily rising, employers are looking to ICHRA plans to control their healthcare spending while still providing workers with adequate healthcare benefits.
“The (traditional group) health insurance cornerstone from 60 years ago has outlived its usefulness,” said Headwater Ventures’ Matt Miller. The company is responsible for investing in ICHRA administrator Venteur. “The goal is to ensure people have coverage, detaching it from the employment construct and making it portable.”
60% of women aged 19-64 rely on employer-sponsored health insurance. But are traditional group plans really tailored to their needs? Enter ICHRA: the customizable solution empowering women to choose coverage that fits THEIR priorities. pic.twitter.com/ZnvXUhofu0
— Venteur Health (@VenteurHealth) May 28, 2024
One employer among the first to adopt the ICHRA concept for its employees was Lycoming College, a small, nationally ranked liberal arts school located in Williamsport, Pennsylvania. The goal is to help cut down healthcare spending costs for not only the institution but also its workers.
Employers have the option of offering this health reimbursement plan to various classes of employees, while group plans may be available to others based on determining factors like geography, salaried vs. hourly pay, and full-time vs. part-time status.
When Lycoming College faced a 60% premium increase thanks to members with high claims, the school had no choice but to look for other healthcare options for its employees.
According to the institution’s associate vice president for human resources and compliance, the school ultimately offered ICHRA plans to all employees working at least 30 hours a week.
Within its first year of offering the ICHRA benefit, Lycoming College saved $1.4 million in healthcare costs, with employees saving an average of $1,200 per person in premiums. Hagan admits that the people in the finance department “really like” the new plan.
“From a cost standpoint, people tend to be pretty happy with it, and people really like having a choice of plans,” said Hagan, although she admits that they have run into problems with the plan’s administration. She notes that some employees’ coverage had to be reinstated after it was lost temporarily. However, Hagan revealed that “those problems have been largely resolved” since swapping out plan administrators this year.
On the other hand, the outlet also reports that several companies that tested out ICRHA plans for employees ultimately decided to return to group coverage options.
Some employers note that this type of coverage can be a hassle to manage because instead of paying one group health plan premium, they now may be responsible for payouts to dozens of individual health insurers. Moreover, experts noted that for employees who have never had to shop for a healthcare plan on their own, the process can be pretty tedious and requires more assistance from employers to make the right decision.
Other concerns include health insurance specialists’ concerns that the plans aren’t the best option for consumers or the individual insurance market. They cite that despite rules preventing employers from offering ICHRA plans to workers who may be sicker or more expensive to cover than others, employers with “relatively unhealthy workforces” may still find the coverage to be more appealing.
“It’s a big disrupter, like 401(k)s,” said Mark Mixer, board chair of the HRA Council and CEO of HealthOne Alliance in Dalton, Georgia. Still, it’s not for everyone. “It’s simply another tool that employers should consider. When it fits, do it.”
According to the HRA Council, ICHRA coverage is currently offered to roughly only 500,000 people among the estimated 165 million individuals with employer-sponsored coverage.
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