Before you officially commit to setting up an ICHRA for your company, you want to know the facts. And while the widespread adoption of the ICHRA model, among a broad range of businesses, suggests it’s a no-brainer decision, you have heard about a few disadvantages.
So today, we’ll dispel some of the more common myths and ICHRA misconceptions. With the added clarity and with your mind at ease about some of these mischaracterized traits, you might be ready to jump in to develop an ICHRA for your company.
ICHRA Misconception #1
The ICHRA model means employees don’t have access to quality healthcare.
ICHRAs reimburse participating employees based on actual out-of-pocket expenses. And to qualify for these reimbursements, employees need to find and enroll in their own healthcare plan via the ACA Marketplace.
This doesn’t equate to less quality healthcare. Unfortunately, there is a misconception that the exchanges offer less-than-adequate coverage. However, with the wide variety of tiered plans and the robust savings available with premium tax credits, the ACA plans offer incredible coverage options. And it’s the traditional group health insurance plan that forced employee participation in a one-size-fits-all model that sometimes proves to be more restrictive as a coverage benefit.
ICHRA Misconception #2
The Trump administration invented the ICHRA.
Regardless of where your politics fall, the ICHRA is a sound business decision. Under the Trump Administration, enhancements were made to improve the policies and company compliance guidelines for the ICHRA model. But the HRA existed before, and the Obama Administration enacted QSEHRA, already serving many businesses and employees well. Moreover, the Trump-inspired provisions expanded the rules to allow employers to reimburse monthly premiums, a huge benefit for employers and employees alike.
ICHRA Misconception #3
Employers with ICHRAs force participating workers to explore health insurance shopping on their own with no help.
How you choose to set up your ICHRA is entirely up to you, within mandated guidelines, of course. However, part of your rollout might include support resources to help employees navigate the ACA Marketplace for the first time. For example, there are free services available from independent brokers, and W3LL helps individuals apply for tax benefits and enroll with ease. The point is, you don’t have to leave your ICHRA employees to fend for themselves.
ICHRA Misconception #4
The ICHRA model divides workers into classes, thus segregating offerings based on employee class.
Under an ICHRA, employers can choose to extend the reimbursement benefits to part-time workers, hourly staff, and even seasonal or temporary contractors. Companies might decide to keep a group health plan for salaried employees and use the ICHRA for these other employee types. On its surface, it may seem segregated. However, it’s actually more encompassing since the ICHRA covers workers who wouldn’t typically qualify or become eligible to participate in the traditional group plan.
ICHRA Misconception #5
Employers pushing employees to the ACA Marketplace means high-claim individuals will drive exchange costs higher for everyone.
The stats are coming in now. And while the ICHRA sends more employees to the exchanges, including the sicker or higher claim individuals, the healthy and young are also joining the ACA Marketplace. The ICHRA encourages everyone to enroll, diversifying and improving the overall individual market.
ICHRA Misconception #6
Employees have to consider ICHRA reimbursements as additional income.
False. Under the ICHRA, employees will provide receipts or proof of out-of-pocket expenses and receive reimbursements. However, while those expenses are covered, the company-sponsored ICHRA reimbursements are not counted as the employee’s taxable income come tax time.
ICHRA Misconception #7
Company owners can’t participate in their company ICHRAs.
While it’s always recommended to consult an accounting professional before making any official decisions about your company, there are scenarios in which a company owner can leverage the ICHRA benefits. Owners of non-profit organizations and C-Corps, for example, can participate. S-Corp company owners are not eligible; however, they can deduct direct expenses.
ICHRA Misconception #8
Only certain sized companies can offer an ICHRA.
Any employer with at least one W2 staff member can offer an ICHRA. And any business type can leverage the many ICHRA benefits, including religious organizations, non-profits, government municipalities, and private sector businesses.
ICHRA Misconception #9
Companies using ICHRAs are not subject to COBRA premium payments.
An ICHRA is actually subject to COBRA. However, the individual medical plans and Medicare an employee subscribes to are not subject to COBRA. And remember, COBRA doesn’t apply if a worker loses coverage during the year due to non-payment of the premium, as an example.
ICHRA Misconception #10
Adopting an ICHRA means the company can’t offer the traditional group plan.
Actually, there are provisions that allow for employers to leverage the benefits of both the ICHRA and a group coverage health plan. As long as the company doesn’t offer both coverage options to the same class of employees, it’s entirely plausible to set up.
ICHRA Misconception #11
Employees contribute to their own ICHRA reimbursement funds.
No. Only the sponsoring employer contributes to the ICHRA reimbursement budget. Now, that being said, employees who purchase their health plans outside of the ACA Marketplace can be allowed to pay monthly premiums, not covered by the ICHRA, in a cafeteria plan.
ICHRA Misconception #12
Companies have to manage the ICHRA platforms entirely on their own, independent of carriers, brokers, or third-party administrators.
No! While any company is entirely free to set up, launch, and operate an ICHRA internally, there is no rule prohibiting help from a broker or partner. For example, W3LL can help as an ICHRA TPA to aid in every level of employee engagement through to compliance and participation analytics. W3LL also provides employees the free help they need when they have to browse and shop the Marketplace.
What other ICHRA misconceptions have you heard? Did these answers help provide clarity for your company’s decision-making process for the upcoming plan year? If you’re still not sure, let W3LL help! Contact our ICHRA professionals today and get facts so you can decide whether or not the ICHRA is suitable for your business and employees.
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With nearly two decades in health insurance, Pete English’s diverse experience makes him uniquely qualified to help health plans and brokers leverage innovative technology in partnership with W3LL. From growing sales staff by 126% over 4 years at a large health plan, to building his own health insurance brokerage firm from scratch with over $7.2MM in annualized premium, Pete has done it all.
Pete English |
