And how will it affect you?
An individual health coverage reimbursement agreement (ICHRA), an arrangement made possible by Trump administration regulations, gives employers of any size the opportunity to reimburse any premiums their employees might be paying for individually-purchased insurance.
As of this year, it is estimated that up to 200,000 people currently receive ICHRA benefits.
This is a big shakeup that gives employers looking to provide health insurance to their employees a new option.
ICHRA’s reimbursement model is simpler than traditional group benefits packages for a few reasons. First of all, it allows the reimbursements to be tax-free. ICHRA also allows for higher limits and individually-tailored design and qualifications as opposed to traditional one-size-fits all group plans. This makes it appealing for lots of employers.
So, how does an ICHRA plan work?
First, business owners decide how much they’ll reimburse each month. Whether the rates are determined by socioeconomic status, family size, or a variety of other factors is up to the employer. Employees then individually determine which health plan works best for them. When qualified medical expenses arise, the employer submits receipts and them facilitates the reimbursement.
ICHRA’s conception stems from unintended results of the Affordable Care Act (ACA) that effectively stopped the practice of reimbursement. A bill signed by President Obama just before he left office created ICHRA’s predecessor – the Qualified Small Employer Health Reimbursement Arrangement (QSEHRA) – which allowed small employers who met a certain set of guidelines to reinstate the practice of reimbursing for individual insurance claims.
Two years, later, new regulations were proposed that expanded the acceptability of these arrangements to include employers of any size.
By 2034, it is estimated that between 10 and 50 million people could be covered by ICHRA.
Can we definitively say it’s better than a traditional health insurance plan?
It might be too soon. But from a bird’s eye view, things look relatively promising.
There’s undoubtedly more cost-control for the employer, and the chance of an unforeseen group increase drops to zero. However, an ICHRA plan does tend to run employers about 10-20% more in expenses than traditional plans would.
But for a lot of people, that slight increase is worth it if there’s less risk involved.
Employers can spend less time worrying about managing their employee’s individual health risks and trying to find a group plan that works for everyone. And from an employee’s perspective, the ability to take a plan that they pick to their next job in the event of layoffs or a new job opportunity means one less thing to stress about.
It will be interesting to see if this new arrangement takes off the way it is predicted to.
If you have questions about ICHRA or other health insurance industry updates, make sure to stay updated on our blog.
