Why Small Employers Should Consider an ICHRA
Beginning in January 2020, employers will have a new option when it comes to providing health coverage for their employees – an Individual Coverage Health Reimbursement Arrangement, or ICHRA. Under the ICHRA model, employers do not offer a group health plan to their employees. Instead, employees purchase individual health coverage and receive a set, tax-free reimbursement from their employer to help cover the cost of their plan. 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 a far more attractive choice for a far wider range of employers.
While ICHRAs can be established by employers of all sizes and can work in a variety of situations, small employers in particular will want to take a closer look at whether an ICHRA is a good fit for their team’s health needs. Below we have outlined some of the main points that make ICHRAs an appealing option, both in general and as they concern small businesses in particular.
- Flexible Structure and Budget
Unlike traditional group health plans, whose costs can increase significantly year after year, you are fully in control when it comes to budgeting your ICHRA. You get to decide exactly how much you will offer in reimbursement, and on top of that, if your employees decide to go without insurance or if they are able to purchase a plan for less than the amount you offered them, you get to keep whatever funds are left over. There is also plenty of room for customization when it comes to the structure of the reimbursements, with employers able to choose whether they want to offer different rates to employees in different situations, such as offering a larger sum to employees with dependents than those who are single.
- 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.
- Happier, Healthier Employees
Health benefits are key to attracting and retaining talent. The past eight years have seen more than a 25% decrease in the proportion of workers employed by smaller businesses versus larger ones, and lackluster health benefits certainly aren’t helping. If your small business has no current health plan, establishing an ICHRA could be a great way to support your employees’ healthcare needs without breaking your budget or distracting you with the endless minutiae of health plan management.
Even if your small business does offer health coverage to its employees, chances are your employees only have one plan to choose from, and that it is a generic, one-size-fits-all type of plan. By switching to an ICHRA, you give your employees the chance to choose the plan that works best for them and their families. Rather than being stuck with whatever their employer has selected for them, employees are free to choose the plan that offers the best network, formulary, or other options that suit their specific health needs. Additionally, many individual insurance plans provide a greater range of perks, tools, and programs for their participants than a group plan would, including access to special apps and concierge services.
Remember that happier, healthier employees also make for loyal, more productive employees!
Official projections estimate that over the coming decade, about 800,000 employers will adopt the ICHRA model, the vast majority of which will be small businesses. ICHRAs have the potential to be a real game-changer for businesses like these, providing a healthcare solution that is affordable and low-risk for employers while offering employees greater freedom of choice. If you are looking for a health plan that will provide real value for your employees without causing you undue stress, an ICHRA may be the answer. Want to learn more? We have several additional articles on ICHRA that can help familiarize you with the format, rules, and how to get started.