Employer-sponsored health insurance premiums are rising. According to the newly released KFF 26th Annual Employer Health Benefits Survey, 2024 saw a 7% increase in annual premiums compared to 2023. As a result, more employers are turning to Individual Coverage Health Reimbursement Arrangements (ICHRAs) as a flexible, cost-effective alternative to traditional group health plans. While ICHRAs offer many benefits, there are many misconceptions about ICHRA. We explore what ICHRAs are, why they are gaining popularity, and dispel common myths.
What is ICHRA?
Individual Coverage Health Reimbursement Arrangements (ICHRAs) enable employers to reimburse employees for individual health insurance premiums and, in some cases, other medical expenses. Employees can purchase their own plans, offering more freedom and control over their health coverage. Meanwhile, employers provide a unique benefit and gain more control over healthcare spending. A win-win solution for everyone.
The Growing Importance of ICHRA
ICHRAs are becoming an increasingly popular option as they provide employers with greater flexibility and control over healthcare costs. For employees, the ability to select individual market plans allows for more personalized health coverage. ICHRAs are also ACA-compliant, which ensures that employees receive coverage that meets essential health benefits.
With ICHRAs, businesses can offer benefits tailored to their workforce’s needs while controlling costs, and employees get more choices. This combination of flexibility and control is why ICHRA adoption is expected to grow in the coming years.
ICHRA Myths vs. Facts
Despite their growing adoption, several myths surrounding ICHRAs persist. In collaboration with the HRA Council, we address some of the most common misconceptions:
Myth 1: ICHRAs were invented by the Trump administration to weaken employee benefits.
Fact: ICHRAs are an extension of the Qualified Small Employer Health Reimbursement Arrangement (QSEHRA) enacted under the Obama administration in 2016. ICHRAs are designed to expand options for employers to offer ACA-compliant health coverage. Rather than weakening employee benefits, ICHRAs allow businesses to offer more customized health plans for their employees, increasing the number of employees with health coverage.
Myth 2: ICHRAs allow employers to selectively provide insurance based on geography or pay, worsening health disparities.
Fact: ICHRAs provide more employees—especially those at smaller organizations—with access to employer-sponsored health benefits. In fact, ICHRAs are projected to reduce the number of uninsured Americans by one million over the next five years. The flexibility ICHRAs offer can help companies tailor benefits to meet the diverse needs of their workforce, ensuring more workers get coverage.
Myth 3: ICHRAs force employees onto subpar plans on the exchanges.
Fact: All health plans purchased using ICHRA reimbursements must meet ACA requirements, including covering essential health benefits. For employees who prefer the traditional group health plan, employers can continue to offer that option. ICHRAs simply provide an alternative, often with more choice in coverage options, rather than forcing employees into inferior plans.
Myth 4: Workers are left to pay out-of-pocket for any plan that exceeds their ICHRA stipend.
Fact: Similar to traditional employer-sponsored plans, employees using an ICHRA might contribute to the cost of their coverage. However, most employees already pay some amount toward their employer-sponsored health plans. With ICHRAs, employees can choose a plan that best suits their budget and health needs, offering greater flexibility.
Myth 5: Employees will have to navigate the individual marketplace with no help from their employer.
Fact: Many employers, along with organizations like the HRA Council, offer tools, apps, and professional broker services to guide employees through the process of selecting an individual health plan. Just as employers provide support with 401(k) plans, they can also provide resources to help employees navigate their health insurance options.
Myth 6: ICHRA allows employers to divide workers into classes, offering some better health coverage than others.
Fact: The class system under ICHRA is designed to offer greater flexibility, particularly for part-time, hourly, or geographically dispersed workers. These classifications allow businesses to provide health benefits that suit the unique needs of their workforce, ultimately extending coverage to more employees.
Myth 7: Employers will push sicker employees onto the exchanges, driving up costs for everyone.
Fact: ICHRA rules are carefully designed to prevent employers from steering unhealthy employees into the individual market. By ensuring that ICHRA funds are offered uniformly within employee classes, and prohibiting choice between ICHRA and group plans within the same class, the rule aims to protect both the individual market and employee fairness.
Why ICHRAs Matter for the Future of Employer-Sponsored Health Coverage
ICHRAs represent a pivotal shift in the future of employer-sponsored benefits by providing both cost savings and greater employee choice. Businesses adopting ICHRAs will need efficient technology and processes—such as EDI connections—to manage enrollments effectively. Automating these processes helps businesses stay compliant, reduce administrative burdens, and remain competitive in a rapidly changing landscape.
W3LL: Your Trusted ICHRA Partner
As ICHRAs continue to grow in popularity and reshape the landscape of employer-sponsored health coverage, having a reliable partner is critical. W3LL stands at the forefront of this transformation, offering secure and scalable solutions that make managing ICHRA enrollments seamless. From ensuring compliance to providing personalized support, W3LL’s expertise in healthcare technology makes us the trusted partner you need to navigate the complexities of ICHRA.
With W3LL, you’re not just adopting a new approach to health benefits—you’re gaining a partner who understands the intricacies of ICHRA and is committed to your business. Whether you’re looking to streamline your operations, stay compliant, or provide your employees with better health plan options, W3LL is here to support your ICHRA journey every step of the way.
Ready to unlock the full potential of ICHRA? Contact W3LL today to explore how we can help your business thrive.
