The Best Cities for ICHRAs
Starting in January 2020, employers will have a new option when it comes to employee health coverage – an Individual Coverage Health Reimbursement Arrangement, or ICHRA. Under the ICHRA model, employers do not purchase a group health plan for their employees. Instead, employees buy individual health coverage and receive a set, tax-free reimbursement from their employer to help cover the plan’s cost. Many employers will already be familiar with HRAs as a general concept, though the ICHRA removes or expands many of the limits seen with older forms of HRA, making it an appealing choice for a wide range of employers.
ICHRAs will be a great solution for employers across the country, though some areas will get a better deal from implementing this new model than others. This is due to the fact that many of the selling points of ICHRAs hinge in one way or another upon what the individual health plan market is like in that particular area. For example, some areas will have a wider range of individual plans available than others, and the cost of individual plans versus their group counterparts can also vary widely.
A recent study by Take Command Health, which drew on data from Vericred and the Kaiser Family Foundation, compared the top 50 metro areas in the US to determine which cities would be the best places to implement an ICHRA in 2020. Six factors were used in these calculations, derived from conversations with benefit consultants, market analysts, and employers themselves:
an especially important consideration for larger employers who want to offer an ICHRA as a way of satisfying the employer health coverage mandate, as the ICHRA will only count towards this mandate if it is considered “affordable”. Affordability is based in part on the cost of the cheapest silver-level individual health plan in the area.
- Fewer Factors to Worry About
All employers’ time is valuable, but small employers in particular often do not have the time or resources to deal with all of the complications that come with managing a group health plan. With an ICHRA, you can help employees get health coverage without many of the downsides that come with managing a plan yourself. This means no more worrying about how to mitigate employee health risk, or whether you will meet participation requirements, or whether the network for the group plan you’ve chosen is a good fit for your employees. Let someone else take the reins of your employees’ health plans so you can focus on running your business.
- Size of Individual Plan Premiums vs. Group Plan Premiums:
many employers interested in setting up an ICHRA will already have some sort of group health plan in place, so it is useful to see the difference in price between that plan and the plans that employees would be purchasing on the individual market under an ICHRA.
- Number and Type of Available Networks:
many employees would prefer a PPO over other types of network, though not all areas will have many networks or network types to choose from.
- Competition Between Insurers:
a major perk of the ICHRA model is that it allows employees the freedom to choose their own health plan rather than having to take the one-size-fits-all plan offered by their employer. However, this kind of freedom doesn’t count for much if the individual market also has few plans to choose from.
- Average Change in Premiums from 2018-2019:
while employers using ICHRAs will no longer need to worry about the cost of their group plan increasing year after year, the cost of individual coverage is also subject to change, for better or worse.
- The Presence of Big-Name Insurers:
employees accustomed to group health plans will be happy to see names they recognize in the individual marketplace, such as Blue Cross Blue Shield, Cigna, Aetna, and United. The more of these familiar names, the better.
Even if you are not in one of the 50 metro areas analyzed in the study, these six factors are still excellent jumping-off points for your own analysis. Keep them in mind when deciding whether an ICHRA is the right choice for your business and its employees.
The Best Cities for an ICHRA
Take Command Health’s study determined that the five best cities to establish an ICHRA are Minneapolis, Los Angeles, Providence, Boston, and Philadelphia, with Cincinnati, Detroit, Cleveland, Riverside (California), and Baltimore rounding out the top 10. Each city’s reasons for inclusion are slightly different, but in general, these are areas where the cost of individual plans is comparable – or even less than – the cost of group plans, premiums are stable or decreasing, and there are a good variety of choices in the individual market. Additionally, Los Angeles and Providence have mandate laws going into effect next year that should help to keep costs on the individual market low, and Boston already has similar laws in place.
This is great news for employers in these areas who are interested in implementing an ICHRA, though it is still important to remember that each business is unique and will have its own needs and priorities. Being in one of the top five cities doesn’t automatically make an ICHRA the best choice for you, just as being elsewhere doesn’t automatically make it a bad option. Please see our other articles to learn more about ICHRAs and whether they would be a good fit for your organization.