Becky Seefeldt is founder and strategic advisor for Angel Vision, helping fuel growth with thought leadership, nurturing and engagement.
When New Kids on the Block first hit the music scene in 1986, few people took notice. Fast forward a few years, and they catapulted to fame with a handful of hit songs, including “You Got It (The Right Stuff),” and helped pave the way for future boy bands to come. Nearly 40 years later, they’re performing and even taking up residency in Las Vegas.
So, how does this tie into healthcare? Individual coverage health reimbursement arrangements (ICHRA) are like the New Kids on the Block of health benefits programs. Authorized in 2020, ICHRA flew under the radar initially, but over time, it’s gained momentum, finding its own “right stuff.”
The big question is whether ICHRA is destined to be a fleeting trend or a game-changer in health benefits for years to come. I have spent 20-plus years working in marketing and strategy with consumer-driven health plans (including reimbursement accounts), contributing to industry benefits publications and more. And I have been monitoring the evolution of ICHRAs since they were introduced in 2019. Let’s dive into what makes ICHRA worth watching.
What is ICHRA?
An individual coverage health reimbursement account, or ICHRA, is a defined-contribution benefit. Employers allocate funds to help employees buy individual health plan coverage and potentially cover other out-of-pocket medical expenses.
Instead of offering a traditional group health plan, the employer sets specific contribution amounts for different classes of employees (i.e., full-time, part-time, seasonal, hourly and salaried). The employee obtains individual coverage and receives employer funds to pay toward premiums. If the employee has extra funds available after paying premiums, they may be able to use the funds to offset other qualified out-of-pocket medical expenses.
What makes ICHRA an attractive option for employers?
ICHRA adoption is growing rapidly, especially among larger employers. According to HRA Council’s 2024 Growth Trends Report, ICHRA adoption was up 29% overall from 2023 to 2024 and a staggering 84% among large employers. Some key reasons include:
• Cost control: Employers can set contribution amounts independent of health plan rate increases.
• Risk mitigation: Moving from the group market to the individual market helps employers limit their risk, especially those with 100-plus employees, where experience-rated plans can lead to steep premium hikes.
• Flexibility for diverse populations: ICHRA suits employers with geographically dispersed, demographically varied or non-traditional workforces, allowing employees to choose plans that best fit their individual needs.
What should leaders consider in an ICHRA administrator?
ICHRA administrators vary widely, so it is important to understand both what you are getting and what you are not. Costs can range from $5- to $50-plus per member per month. A few key questions to consider:
• Does the administrator provide a platform to assist employees in selecting individual insurance plans? Is there personal assistance available for those who want it?
• Will I need or want to work with an insurance broker in addition to an ICHRA administrator?
• Is the process streamlined for enrollment, premium collection and payments? Or is it a reimbursement-only model? Will payroll integration be needed?
• What education and guidance are provided for both employers and employees?
• Will employees receive ongoing support for their plans? What does ongoing support or reporting look like for the employer?
• Will the administrator provide other products or services for the employer and/or employees?
Employers have different needs and different baselines from which they come. Any combination of technical and service support can be a fit for an employer. Just make sure the vendor(s) you choose address your must-have requirements.
What ICHRA cautions should leaders know about?
1. Legislative uncertainties may impact the future of ICHRA.
ICHRA was approved through executive action under President Trump’s first term. While efforts to codify ICHRA into law are ongoing, it remains vulnerable to future executive action.
2. Certain rules apply.
Even though ICHRA is used to purchase individual health coverage, it is still considered a group health plan and is subject to certain rules outlined by the Internal Revenue Service (IRS). Here are a few items to note:
• Employers can meet their employer-coverage mandate under the Affordable Care Act (ACA) using ICHRA.
• ICHRA is subject to ACA reporting requirements.
• Employers that offer ICHRA to a class of employees cannot also offer a traditional group health plan to the same class.
• Employees who receive an ICHRA allocation are not eligible for any subsidies on the exchange.
An ICHRA administrator or benefits advisor can assist employers in designing their ICHRA to meet these requirements and avoid potential pitfalls.
3. Financial impacts vary across employees.
Group health insurance takes a collective approach to benefits, with all employees paying similar amounts for their coverage. When moving to individual coverage, each employee chooses a plan that meets their needs. Younger, healthier employees may see savings, while others might face higher premiums. Employers must be prepared to address potential dissatisfaction among those financially impacted by the switch.
4. There is potential for disjointed experiences.
For decades, the benefits and health care industries have been centered around an employer-driven payment and service model. While strides have been made to enhance the individual market, gaps remain. Without clear guidance and education, employees can feel unsupported, creating friction and dissatisfaction in their healthcare experience.
Does ICHRA have the “right stuff”?
The verdict is still out on whether the ICHRA will transform the benefits landscape. But, the program certainly earns airtime. With a boost of legislative certainty, continued improvements to customer experiences and ongoing education, it just might have what it takes.
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