Individual Coverage Health Reimbursement Arrangements (ICHRAs) continue to be incredibly popular benefits platforms for businesses of all sizes. Rebounding from the economic hardships imposed by the pandemic, companies across all industries are looking for the most cost-effective ways to offer employee benefits. And the flexible nature of the ICHRA allows business owners to control annual health benefits costs in a way that continues to be equally favored among employees. But what about ICHRAs as a business offering from group health insurance companies and individual brokers? Is there an impact or benefit more conducive to one or the other?
What the Group Offers
Traditional group health insurance providers have enjoyed their corners of the market for decades. Companies partner with these providers to customize health insurance policies for their employees and members. But will these group models be able to compete with the ICHRA platform?
The Group Insurance Model
These plans, usually provided by one company, are generally customizable but still represent a one-size, fits-all model. The business offers a platform of coverage to its employees and can usually do so at a lower cost because the risks are shared among other members of the group plan. In most cases, the company pays for a portion of the premiums, leaving a more affordable buy-in amount at the employee level.
Advantages to the Group Approach to Coverage
There are significant benefits to businesses that partner with group health plan providers. One of the more prominent advantages is cost. Because the risk pool is larger, the cost of enrollment is substantially reduced for both the employer and the employee. There are tax incentives available to businesses offering health insurance to staff members, as well.
Common Group Health Plan Examples
Depending on the nature, size, and budget of the business, there are several types of group health plans to help fit the specific needs of the collective. For example, many companies choose Health Maintenance Organization (HMO) plans that tend to have lower enrollment premiums, in general. Others find more flexibility, and employee endorsement, with the Preferred Provider Organization (PPO) plans. These PPOs tend to include more choice at the employee level in terms of which doctors and specialists the individual prefers to use.
What the Individual Broker Offers
Over the years, companies began to explore the many benefits of working with individual brokers. A broker can bring a host of variety and flexibility to a company’s health insurance offering. Having an independent guide to selecting, enrolling, and implementing an employee-facing plan tends to offer a few pivotal benefits.
A Broker’s Perspective
Health insurance brokers are typically authorized by various insurance providers to act on their behalf in representing coverage options and plans. The role of the individual broker is to offer businesses appropriate and cost-effective choices for employee health insurance products. The broker is charged with guiding clients through the policy setup process, as well. Businesses can take advantage of shopping a variety of provider plans in order to find the best-fit coverage benefit.
Company Benefits of Working with a Broker
Companies small and large enjoy a host of benefits when working with an individual broker. For one, businesses can save time and maximize efficiencies during the shopping and plan comparison process. The broker can often present apples-to-apples options available, making quick work of the decision-making process. And the broker usually does all the plan and provider vetting, allowing business owners to make educated decisions based on quotes with reputable health insurance companies.
The Commission Factor
When health insurance providers authorize a broker, they ultimately agree to pay those brokers commissions based on employer enrollment. The industry average is roughly three to six percent of the total premium for each business. Based on a company employing 100 people, that could translate to roughly $50,000 each year for the duration of the plan. This kind of incentive could be discouraging for businesses who may be swayed to enroll in plans that benefit the broker more than the company. Not all brokers operate this way. But knowing where the incentives lie can be a caution to business owners considering a broker portfolio of plans.
How the ICHRA Impacts Both
So, how does the ICHRA model fit into each of these existing ecosystems? With increased popularity, the reimbursement model is a stark contrast to the traditional group plan, regardless of which entity is offering it. And since the ICHRA isn’t a health insurance product at all, which side of the current group and brokerage coin benefits more?
Group Plans Are Still Relevant
Even with the ICHRA option, companies are finding balance in choosing to offer both traditional group plans and the reimbursement model. Some businesses are buying into smaller group offerings directly from providers as a means to provide coverage for more salaried staff. They’re then using ICHRA benefits to help hourly, part-time, and seasonal staff with expense reimbursements. A group provider can benefit from this approach, promoting a more customized and blended benefits offering.
How the Broker Fits into the Equation
An individual broker can similarly represent the health insurance providers by offering a blended solution to health benefits. Instead of selling against an ICHRA, the individual broker can continue to promote the benefits of the group plans for the salaried employees. A broker may be able to explore additional representation opportunities by offering third-party administrator services to help companies implement their ICHRA plans, as well.
Companies Can Initiate Their Own ICHRAs
The ICHRA model means a company can carve out an annual budget offering and set up a reimbursement policy and procedure in-house. Regardless of the company’s size or industry, there are countless cost benefits to controlling the employee-facing plan. And with third-party administrators like W3ll, with all the tools and resources available for businesses to set up their own systems, groups, and individual brokers may not be needed.
ICHRAs continue to change the landscape of how businesses offer health insurance benefits to their employees. And the wide-spread adoption indicates there is an inherent win-win for companies and staff alike. To learn more about the ICHRA benefits, contact W3ll to explore the latest trends in setup, implementation, and ICHRA management.