ICHRAs (individual coverage health reimbursement arrangements, pronounced ICK-RAHs) have been a hot topic for discussion in the United States. After their introduction in 2020, new opportunities have emerged for small-medium sized businesses who want different options for their healthcare coverage other than a group plan.
SHRM, or the Society for Human Resource Management, is a large organization based in Alexandria, Virginia whose purpose is to “elevate the HR profession”.
Choosing and distributing employee benefits is a very important part of the role of HR managers everywhere – especially during “The Great Resignation”. In the mostly post-COVID United States, job seekers everywhere are looking for something else – whether it’s higher paying work, a more dignified role, a permanently remote position, or a new position in a new place. HR Managers are carefully considering how they can be an appealing option for potential job-seekers – and to retain talent they already have.
When a major change in healthcare legislation, like ICHRA, comes to light, it always creates new options in the industry. With this new option, many employers may be able to offer their employees a more customizable healthcare benefit option – instead of forcing them into a group plan. Joe Grogan, director of the White House Domestic Policy Council, said: “Using an individual coverage HRA, employers will be able to provide their workers and their workers’ families with tax-preferred funds to pay all or a portion of the cost of coverage that workers purchase in the individual market. The departments estimate that once employers fully adjust to the new rules, roughly 800,000 employers will offer individual coverage HRAs to pay for insurance for more than 11 million employees and their family members, providing them with more options for selecting health insurance coverage that better meets their needs.”
11 million employees is a sizable number – these individuals may have had no healthcare benefits before, or they may have had a healthcare benefit that was very expensive monthly and went underutilized.
The Difference Between HSAs and ICHRA
SHRM laid out the differences between the eligibility requirements and benefits of both HSAs and ICHRA. Here’s a link to the very informative post. We’ll summarize here.
HSAs can only be paired with HDCPs – high deductible care plans. HDCPs are often expensive to the consumer and cover quite limited options. However, when paired with an HSA, they’ll get a bit of freedom with how they spend their allocated healthcare dollars.
The article points out that there’s a bit of an advantage to HRAs because they have fewer requirements – no HDCP is required, though they’re often offered. And HRAs may be able to be used to cover non-group health insurance premiums, which allows the individual employee some freedom to find a plan that works for them. However, insurance plans aren’t required with an HRA – which can entice healthy individuals to be able to explore alternatives to health insurance.
The advantage to both HSAs and HRAs is that they can be funded with pre-tax dollars, allowing the employer and employee to both save on their healthcare expenses.
HRAs are employer-owned, so many companies may find them more customizable and enticing. There are no contribution limits for qualifying small businesses, so you can build a great team and give them great benefits.
ICHRA May Permanently Change the Healthcare Landscape
By giving more options to employees and employers, the insurance industry may need to rescope their place in the market. Since there are no hard requirements stating that someone needs insurance, and since employers are looking to rescope and improve their benefits packages, ICHRA options now give a wealth of new options for the healthcare space.
Insurance has never been a one-size-fits-all solution. Many people have different needs – some only need emergency, others need a monthly prescription covered, and others have complications and pre-existing conditions. Very few group health insurance plans that employers offer nowadays can suit all these people in a cost-effective way.
ICHRA aims to be able to open the floodgates of healthcare solutions in the United States.
HR Managers Making Benefit Decisions
New options mean new complications, but new opportunities.
If you’re reading this article, you’re probably interested in what ICHRA means to you. SHRM’s articles and learning resources on how ICHRA will affect HR managers and benefit brokers in the United States are available on their site – and you can read a few before you’re required a membership. Look through some of the topics and see if any are of interest to you.
How will ICHRA change your business?