Five things to know about ICHRA – health care’s latest acronym
by John BarkettMr. Barkett is Senior Director of Policy Affairs at Willis Towers Watson. Reprinted with permission. Connect with him by e-mail: [email protected].
This year, employers will have a new option for providing employees access to health insurance — an individual coverage health reimbursement arrangement, also known as ICHRA (pronounced ‘ick-ra’). And while it’s been on the horizon since 2017, the final rule published in June 2019 now has employers wanting more information on what it could mean for them and their employees.
Here are five things to know about health care’s latest acronym:
1. ICHRAs let employees choose their own plan
With a traditional group health insurance plan, employers offer a limited selection of health plans for employees to choose from. With the new, potentially game-changing ICHRA model, employers can now provide employees with tax-free funds to purchase their own health insurance plan. Employers gain cost predictability and reduced administration effort while employees can choose their health insurance plan from a broader range of options on the individual health insurance marketplace.
2. The ICHRA model is flexible
Employers can set up an ICHRA based on their needs and preferences, including choosing how much to credit employees each month through their HRA. Higher credits can apply to employees who face higher premiums, such as older employees and employees with dependents. Employers can also choose whether the HRA can reimburse premiums alone or out-of-pocket costs as well, and they can decide whether to allow unused HRA funds to roll over year-to-year.
Employees gain new flexibility as well. Besides getting to choose a plan that best fits their needs, the individual health insurance plan itself is portable — employees can keep their plan if they leave their job.
3. Employers can offer an ICHRA by employee class
Interested in piloting the ICHRA model? Maybe you think an ICHRA would be appropriate for one group of employees, but not another? You may be in luck.
Employers can choose to offer an ICHRA to a specific class of employees, while continuing their traditional group health plan for other classes. Each class of employees can be offered either an ICHRA or a traditional group health plan, but not both. The rule provides clear definitions of what constitutes a class of employees. Classes include (but are not limited to): full-time, part-time, salaried, hourly, seasonal, collectively bargained employees, new hires or worksite location. Additional rules are in place to prevent discrimination by employee demographic, health-status or group.
4. Timing is everything
While employers can begin offering an ICHRA as of January 1, 2020, few will be able to introduce an ICHRA program so soon. Like any new benefit delivery model, there will be new compliance and administration requirements to consider. Most early adopters will likely spend early next year evaluating new options for managing an ICHRA program and planning for an ICHRA implementation in 2021 and beyond.
Who might move first? Despite the quick turnaround required to activate a new model, some businesses are in a unique position to integrate an ICHRA into their benefit offerings quickly and seamlessly. Smaller, geographically concentrated businesses and companies with distinct benefit offerings for specific subgroups of employees (e.g., part-time, seasonal or hourly workers, higher-turnover populations, and the like) are expected to be some of the earliest adopters of this model.
5. Communication is key
When it comes to employee benefits, change can be daunting. Employers should already be communicating regularly with employees about their benefit offerings, but transparency becomes particularly important with this new health care coverage model.
Employers offering group health coverage today will need to carefully develop a communication strategy about the transition before announcing the move to an ICHRA. Employees will want to know what the new model means for them, and since they’ll now be in charge of selecting and enrolling in their own health insurance plan, they’ll need some guidance on how it works.