Understanding ICHRAs: A Guide to Innovative Health Benefit Solutions 

Last Updated on July 5, 2024

In recent years, Individual Coverage Health Reimbursement Arrangements (ICHRAs) have emerged as a flexible and customizable option for employers seeking to provide health benefits to their employees. According to a study done by the HRA Council, ICHRA adoption grew 29% year-over-year between 2023 to 2024. This innovative approach offers a departure from traditional group health insurance plans, allowing employers of all sizes to tailor benefits to meet the diverse needs of their workforce. In this blog post, we explore the fundamentals of ICHRAs, their flexibility and customization benefits, considerations for large and small employers, administration aspects and other pertinent information surrounding this innovative healthcare solution. 

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What Are ICHRAs?

ICHRAs, established under federal regulations in 2019, enable employers to reimburse employees for premiums they pay for individual health insurance coverage or other qualifying medical expenses. Unlike traditional group health plans where employers select a single plan for all employees, ICHRAs empower employers to provide financial assistance that employees can use to purchase individual health insurance plans or other eligible healthcare expenses. 

At its core, ICHRAs are essentially HRAs, or Health Reimbursement Arrangements. These accounts can be covered by employers for employees to go out to the marketplace exchange, enroll in an individual plan and then use those dollars tax-free to cover part of their health insurance premiums. All of this is tax-free to the employee when used for eligible expenses, and a tax write-off for the employer. So, ICHRAs provide tax savings for both the employer and the employee, providing a win-win situation. 

Flexibility and Customization of ICHRAs

One of the primary advantages of ICHRAs is their flexibility and customization. Employers can define the contribution amount they are willing to provide to employees, which can vary based on factors such as employee status (full-time, part-time), location or family size. This flexibility allows employers to tailor benefits to different segments of their workforce, accommodating diverse healthcare needs and preferences. 

Employees also benefit from flexibility with ICHRAs, as they can choose health insurance plans that best suit their individual or family needs. This freedom of choice can lead to increased employee satisfaction and retention, as individuals can select coverage that aligns with their preferred doctors, networks and coverage options. 

ICHRAs for Large and Small Employers

ICHRAs are particularly advantageous for both large and small employers. Large employers often have workforces spread across different locations and/or with varying healthcare needs. ICHRAs provide these employers with a scalable solution to offer benefits that can be customized to meet the needs of different employee groups or geographic regions.  

ICHRAs can complement traditional group health plans, potentially reducing group benefit premiums. For instance, in many large organizations, a management class may be offered traditional group health options, while a non-management class with lower participation rates may opt for ICHRAs. This segmentation helps increase participation rates in the group health plan where it is offered, often contributing to reduced benefit premiums. Furthermore, ICHRAs can be structured to ensure compliance with the requirements of the Affordable Care Act. 

Small employers, on the other hand, may find ICHRAs appealing due to their cost-effectiveness and administrative simplicity compared to traditional group health plans. Instead of navigating the complexities of selecting and managing a single group plan, small employers can offer ICHRAs as a straightforward and competitive benefit option. 

ICHRAs From an Administration Standpoint

From an administrative perspective, ICHRAs offer simplicity and efficiency. Employers do not have to negotiate with insurance carriers or manage compliance issues associated with traditional group health plans. Instead, they define the contribution amount, establish eligibility criteria and facilitate reimbursements for qualifying expenses. Many employers who offer ICHRAs will meet with an ICHRA administrator, and together they will come up with a plan regarding payroll deductions for the employees’ portion of the premium, pre- vs post-tax deductions, debit card solutions, etc.  

Administrative tasks associated with ICHRAs can be streamlined through technology solutions that manage reimbursement processes, verify eligibility, and provide employees with tools to make informed decisions about their healthcare coverage. This administrative ease and outsourcing opportunities make ICHRAs an attractive option for employers looking to simplify benefits administration while offering valuable health benefits to their workforce. 

Considerations and Future Outlook

As ICHRAs continue to gain traction in the benefits landscape, employers should consider several factors when implementing this benefit option. These include compliance with regulatory requirements, communication strategies to educate employees about their healthcare options, and ongoing evaluation of the effectiveness of the ICHRA in meeting the organization’s goals and employee needs. 

Looking ahead, employers and benefits professionals should stay informed about industry trends and regulatory updates to leverage ICHRAs effectively as part of their overall benefits strategy. According to that same HRA Council study, ICHRA already shows extremely high retention rates among those that have opted to go that route, emphasizing the sustainability of a benefits solution plan. ICHRAs have and will continue to satisfy both the employee and the employer. 

Embracing Innovation in Employee Benefits

ICHRAs represent a significant innovation in the realm of employee benefits, offering employers unparalleled flexibility, customization and administrative simplicity. Whether for large corporations, navigating complex workforce dynamics or small businesses seeking cost-effective benefit solutions, ICHRAs provide a versatile option to support employee health and well-being while aligning with organizational goals. As the landscape of healthcare benefits continues to evolve, ICHRAs stand out as a promising avenue for employers committed to offering competitive and tailored benefits packages that meet the diverse needs of their workforce. 

By embracing the potential of ICHRAs, employers can enhance employee satisfaction, improve retention rates, and demonstrate their commitment to supporting the health and financial wellness of their workforce. 

MyHRConcierge Can Help You Find an ICHRA Solution!

Employers exploring ICHRAs should consider consulting with benefits advisors and leveraging technology solutions to maximize the benefits of this innovative approach. By embracing the potential of ICHRAs, employers can enhance employee satisfaction, improve retention rates and demonstrate their commitment to supporting the health and financial wellness of their workforce.  

MyHRConcierge offers a comprehensive suite of Human Resources solutions. MyHRConcierge can provide exceptional references and help when it comes to implementing ICHRAs into your company. For expert guidance on navigating ICHRAs, contact MyHRConcierge at 855-538-6947 ext.108, ccooley@myhrconcierge.com today. Or, schedule a convenient consultation below: