From established 3,000-person companies to startups across a variety of industries, you can help your clients embrace the opportunities of the individual health insurance market with an ICHRA.
With renewal rates on group health plans coming out now for your January 1 clients, you’re likely experiencing some larger-than-expected increases. “Looking at our internal analytics, we’re seeing average renewal increases of 15.2 percent, and those rates aren’t going down,” said Merrell Botello, a benefits consultant with Burnham Benefits. “People need something different. We’ve been doing group benefits the same way for decades and we just need to really try something new.”
Of course, the last thing you want to do is relay a major renewal rate hike to your clients, but what can you do if you’ve exhausted your go-to tactics (think: plan design changes and carrier changes) to bring them back down?
Many consultants are finding the answer in an Individual Coverage Health Reimbursement Arrangement (ICHRA). This alternative to traditional group coverage allows employers of any size to contribute tax-advantaged money to their employees for the individual health plan of their choice, all while staying compliant with the Affordable Care Act (ACA).
Companies that are best suited for an ICHRA can save an average of 20 percent–or more–on their yearly premiums. But how can you be sure an ICHRA is the right option for a company in your book of business?
Consider this your cheat-sheet on how to evaluate if your clients should convert from group health plans to ICHRAs.
Is your client in a high-risk industry or one with ongoing high-cost claims?
If you have clients in construction, manufacturing, agriculture, or similar industries, you know that cost predictability is an issue for these businesses. Their employees work physically demanding jobs and tend to be high plan utilizers, resulting in higher group rates. You can eliminate claims risk from the equation with an ICHRA because direct-to-carrier rates aren’t dependent on claims from a company’s employee population. Instead, they are driven by the stable individual market resulting in more predictable costs.
If large medical loss ratio is a concern, you may also be considering a self-funded option for your clients. While self-funding can lower rates initially, it adds administrative complexity and the need for costly stop-loss insurance. ICHRAs generally provide the same, if not better, savings minus the possibility of unexpected claims or the need for stop-loss insurance. And with the right ICHRA administrative partner, there’s less of a burden on HR teams not more.
Is your client a high-growth startup? Or does it have a remote workforce?
Startups might have humble beginnings, but many find themselves scaling fast and needing to attract top-tier talent to innovate and grow. However, once they reach a certain size, they become classified as Applicable Large Employers (ALEs)–and are subject to the requirements of the ACA.
ICHRAs not only help startups remain ACA compliant and flexible as they scale, but they enable them to provide attractive benefits packages to their valued staff. Because ICHRAs make it possible for employees to access local, in-network coverage, startups and companies with geographically distributed workforces can offer health coverage regardless of where anyone on their team calls home.
Is your client a business with Medicare-eligible employees?
Healthcare, education, and nonprofit businesses tend to have a significant number of Medicare-eligible employees in their workforce, especially those that are mid-market or larger in size. According to the Bureau of Labor Statistics’ estimates from 2020, 19.5 percent of Americans 65 or older are either working or looking for work. That means there’s a good chance your clients across many industries have workers who are eligible for Medicare.
ICHRAs are a powerful alternative to group health plans for these workers. Medicare is considered an individual plan under ICHRA, meaning premiums are eligible for tax-free reimbursement. This can save employees thousands of dollars annually, while employers can see significant savings by avoiding the claims risk and higher premiums associated with enrolling older employees in group plans.
Additionally, employers are strictly prohibited from offering incentives to Medicare-eligible employees to enroll in Medicare rather than a group health plan. As a result, employees often use the group plan as their primary coverage. Offering an ICHRA eliminates the unnecessary double coverage for the employee and the potential compliance burden for the employer.
Does your client have a high turnover or a seasonal workforce?
Many of your clients in high turnover or seasonal industries, such as retail, staffing, or hospitality, have likely voiced the challenges that come with having an ever-changing workforce. Benefits offerings, particularly health coverage, factor significantly into employee satisfaction ratings. However, traditional group plans can be costly and difficult for employers in these industries to offer when they require 75 percent employee participation. And with plans tied to their employer, employees in high-turnover industries can suddenly find themselves without the coverage they need to care for their health.
ICHRAs can make a significant impact for both employers and employees in high-turnover or seasonal industries. Unlike group plans, ICHRAs don’t mandate a set rate of participation, giving employers much more freedom in the coverage they can offer. Plus, with an ICHRA, employees own their plans, ensuring health coverage even when they leave the company. For the employer, this also means virtually eliminating the need for COBRA, which is a huge win for their often stretched HR teams.
ICHRAs Can Revolutionize Healthcare Benefits for Your Clients
No two companies have the same business needs, but the ever-rising costs of group healthcare rates are a shared concern across organizations of different sizes and industries. As a trusted advisor to your clients, they’re turning to you to help navigate these choppy waters. ICHRAs can be an innovative solution for many different business types across your book of business.
There are 3.1 million individuals (about the population of Arkansas) enrolled in an ICHRA today. By 2025, 11 million are projected to be enrolled in ICHRAs and 800,000 employers (about half the population of Idaho) are predicted to offer them according to the Department of Labor. This is an increasingly popular alternative to group plans that businesses are strongly benefiting from, and your clients will want to know the ins and outs of how they can benefit, too. Stay ahead of the curve and provide your clients with the insights they need on ICHRAs–the future of healthcare benefits.
