The New ICHRA Health Plan gives choice back to your employees in the same way as the 401K. Find out how ICHRA works and how you can make it work for you.
Procuring group health benefits for your workforce is an expensive proposition. And it can be rather complicated, as well. As an employer, it can be especially challenging to ensure your employees have access to the healthcare services that they actually need. Since every employee has differences in health and financial condition their needs can be very different from person to person. You certainly don’t want to waste your money, on health benefits that nobody sees as beneficial.. This is the biggest reason why choosing group health insurance for your employees can be terribly challenging. This is because individual healthcare matters are so varied and can quickly become exceptionally specialized and expensive.
How are you supposed to find health insurance that is as varied as your workforce might be, and is still affordable?
I bet at some point every single employer has asked the question, “why can’t I just give them the cash to buy the health benefit they want?”. Wouldn’t it be far more effective just to let everyone choose their own healthcare plan?
Well, now that you mention it, that is exactly what the new ICHRA plan is all about.
The Problem That the ICHRA Plan Solves
The unfortunate truth for many Americans is that healthcare can quickly become expensive and health insurance is completely unaffordable. That’s why so many Americans rely on their employer-sponsored group health insurance. That’s because Not only does a good healthcare plan offer your employees peace of mind, but it can also have a huge impact on employee satisfaction and retention.
Employees are proven to be far more loyal to their company when they feel valued and cared about. And, when employees are mentally and physically healthy, it is evident in their work results. So while providing group health benefits is financially costly, in the long run, the business reaps the benefits.
The big problem is that the health needs of your entire workforce simply cannot be met with a simple one-size-fits-all group health insurance policy. With group health insurance some employees get a real benefit while others are left out in the cold.
Some employees may need mental health benefits for therapy, while others may not. Some employees may need benefits that cover chronic care and medications, while others who are healthy just want easier access to primary care. . Many Americans live perfectly healthy lives while others suffer with chronic medical conditions that need specialized treatment. Finding a group health insurance plan that can cater to a wide range of employees’ needs is close to impossible. And even if one exists that you can afford, good luck finding an insurance broker that will point you in a cheaper direction.
This is the problem that an ICHRA based benefits plan addresses. It is a simple system that allows employees to choose their own health benefits and be reimbursed by their employer. Properly used, this new strategy can end up saving your business big money, and will certainly save you man-hours. And the best part? Your employees will feel even more valued and cared for, as you have made sure they are able to acquire a healthcare plan that actually suits them as an individual. Employees appreciate employers who help them pay for healthcare they need and can use.
With ICHRA, dealing with health insurance group benefits packages can be a thing of the past. As the employer, you will still be offering an ACA qualified healthcare benefit, but will no longer be responsible for arranging it. You will be lightening your load, simplifying the entire process, and your employees will appreciate being able to take control of their healthcare.
Is the ICHRA Plan Going to Work?
The ICHRA plan has been available since January 2020. And so far, it’s smooth sailing. But, with all the ups and downs Americans have been through, it’s understandable that you’re a little skeptical when it comes to healthcare.
The truth is, this isn’t the first time something like this has been introduced. Do you remember the 401K? Well, the ICHRA plan isn’t all that different. The core idea at the center of the 401K and the ICHRA plan is to give employees more control with regards to their benefits and how to ‘invest’ your employer contribution.
Just like the 401K replaced the employer controlled pension plans, the ICHRA plan is here to replace outdated employer controlled group health insurance.
Before the 401K, employers made all the investment decisions, and the employees were stuck with whatever investments the employer picked. Sounds a lot like group health insurance to me. With the newer 401K, however, employees can now invest their employer’s contribution however they think is best for their individual financial goals and objectives. That’s exactly what the ICHRA plan does for employee group health benefits. Employers contribute an agreed-upon amount to each employee, each month. Employees Can choose to spend that contribution on a healthcare plan that is suited to their individual health condition and financial means.
If you choose to switch from group health insurance to an ICHRA plan, you can expect the following benefits:
- Employee satisfaction will go up because you’ll be giving your workforce the opportunity to find the best health benefit for their needs
- No more open enrollment headaches
- No more group health insurance renewals- which can get ugly if any of your employees become seriously ill
- A more predictable and stable budget for employee healthcare benefits, and
- It solves the problem of run-away premiums that so often pop up with group health insurance.
The ICHRA plan really does seem to be a win/win for both employees and employers.
How Does the ICHRA Plan Work?
So now that we have given you an idea of what an ICHRA plan can do for you and your business, let’s go over some of the finer details. The best part of the ICHRA plan is that it’s easy to understand and simple to execute.
HRAs and the ICHRA
An HRA is a Health Reimbursement Arrangement. These have been around for some time in various formats. What we’re discussing is the ICHRA, or rather, the Individual Coverage Health Reimbursement Arrangement.
The ICHRA plan was introduced at the beginning of 2020. And so far, so good.
The Process Behind Your ICHRA Plan
To use an ICHRA plan, you need to follow these four steps:
Set an Allowance
As the employer, you must decide on the allowance each employee will receive to spend towards their healthcare. Age, location, and employee classification are all variants that you should consider along with your Scoop Health ICHRA advisor. As the employer, this is your most important job. You must make sure that the amount is realistic and affordable. If you have over 50 employees then there are minimum affordability testing requirements that must be met. These requirements are outlined in the Affordable Care Act and Scoop Health can help you in picking the right contribution strategy. The employer reimbursement must be paid to the employees each month, not as a lump sum.
Employees Buy Health Care
The employee is responsible for purchasing their own individual health insurance plan with assistance from a TPA provided by the employer. By letting the employee decide on their own healthcare package, they are free to select the most suitable and affordable plan available. They can take their spouse and children’s healthcare needs into account too by selecting something that fits in the household budget.
Employees can also select an option that costs more than their ICHRA allowance to get better coverage. They will pay for the coverage with their own money, and then be reimbursed in their paycheck from the ICHRA. The employee will be reimbursed up to the agreed-upon amount and then pay any difference out of pocket. This is what makes ICHRA such a dynamic option. People can decide how much they need to spend, to get the coverage that makes them feel at peace. The employer is no longer forced to purchase group health insurance that affordably solves every employee’s health needs. No longer is the entire group of employees subsidizing the cost of a few very sick individuals on the group health insurance policy.
Under the ICHRA strategy, the employer uses a TPA that helps employees navigate an individual health insurance exchange. These exchanges will have virtually every individual option available in the marketplace so that employees can seek out and compare multiple ICHRA health insurance plans. If they don’t want to go with traditional health insurance, employees are free to opt-out of the ICHRA reimbursement for health insurance. Employers are then free to offer a financial subsidy to help employees purchase more affordable, dynamic options to health insurance, Like medical cost-sharing, and virtual primary care for example.
Employees Submit Proof of Incurred Expenses
Once the employee has paid for their healthcare plan, they will present proof of payment to their company. The TPA checks that everything is in order and then processes the reimbursement. Usually, this is done through a payroll credit.
The Company Approves and Pays the Reimbursement
The TPA will reimburse the employees in a timely manner using pre-tax funds from the employer to do so.
Need to Know Facts About Using an ICHRA Plan
There are several key points about introducing an ICHRA plan to your workforce that you will want to know:
ICHRA Plans are Available to Businesses of All Sizes
Under the Affordable Care Act, whether you are an SMB or an ALE, you can use an ICHRA plan and avoid any penalties under ACA. Any size business will benefit hugely from an ICHRA plan when it comes to saving man-hours and money. If you only have 10 people at your disposal to tend to your day to day business, you don’t want to waste man-hours sifting through health insurance options. Just to end up making half your employees mad by the choice of group health plans you made.
BOth Applicable LArge Employers and Small and medium-sized businesses can save a ton of money. This happens when sick employees who need health insurance take the employer’s subsidy and purchase individual health insurance. The healthy employees will opt out and pick a lower-cost medical cost sharing alternative. This lower cost ends up saving everyone money.
Tax-Free Money is Used to Reimburse Employees
Another stand-out feature of using an ICHRA plan is that you will use pre-tax dollars to reimburse your employees who choose individual health insurance. The ICHRA funds can also be used to pay for employee assistance programs like virtual primary care. This can end up saving 30-40% compared to buying old school group health insurance for all of your employees. It’s can generate amassing earnings add-back to your annual EBITDA.
It is up to the Employer to Decide on the Allowance Allocated to Each Employee
Traditional health insurance is not known for its flexibility. Sometimes, you have no choice but to take an insurance quote that is over your projected budget. This seems to happen almost every single year. Now, with an ICHRA plan, you can decide on how much you would like to contribute to each employee to stay compliant with ACA and to incentivize and reward your employees with great health benefits.
Employers Can Differentiate Between Their Employees According to an Official Classification List
There are a number of considerations that will influence how much you are allowed to allocate to each employee group. Are all employees seen as equal in the eyes of the business? Perhaps you have full-time and part-time employees working for you. The classification list details how you may differentiate between your employees when it comes time to make contributions towards their health benefits. Each class of employees can be allocated its own allowance amount.
According to the ICHRA guidelines, there are 11 different employee class categories:
- full-time employees
- part-time employees
- seasonal employees
- salaried employees
- hourly employees
- temporary employees working for a staffing firm
- employees in a waiting period
- employees covered under a collective bargaining agreement
- foreign employees who work abroad
- employees who live in different geographic locations, and
- a combination of any of the above classes.
Employers can also consider an employees’ age and family status when deciding on their allowance. This is especially important because individual health insurance options are age banded. So an ICHRA strategy can be easily structured to ‘do no harm’ to any single employee or group of employees. However, the allowance for the oldest employee cannot be more than 3x the allowance of the youngest employee within the same class.
Employees Can Always Spend More Than Their Allowance
The employer’s contribution to the ICHRA plan can be as large as you want as long a the funds are spent on qualifying expenses. . And should the employee pick an individual insurance option that costs more than their allowance, they can simply pay the difference out of their pay. This means that an ICHRA plan will not limit even those employees with highly specialized or expensive healthcare needs.
Employees Are Not Limited to Traditional Health Insurance
With an ICHRA plan, healthy employees can think out of the box and save money. They can move away from health insurance, and go for more affordable alternatives. Like Medical Cost Sharing and Direct Primary Care, for example. Many times the employer’s contribution is more than enough to cover 100% of these costs for health insurance alternatives. In our experience, as many as 80% of employees have chosen medical cost-sharing over health insurance when presented with this choice.
How is an ICHRA Plan Different From Traditional Health Insurance?
With ICHRA, employers have total control over their annual spending for employee benefits. No more unexpected renewal increases. Employers can decide to increase their contribution based on the budget. Employees are given complete freedom to find the best healthcare option to suit their needs. ICHRA plans even allow employees to potentially be reimbursed for additional healthcare costs. This can include preventative care, virtual Direct Primary Care, prescription medications, or labs.
It gives both employers and employees flexibility and predictability. With most health insurance policies, you can’t say the same, what with deductibles, coverage limits, and network restrictions. With an ICHRA plan, your employees will be able to pick a health plan that suits them and their family’s health and financial needs. They can pick an individual health plan option that offers flexibility and easy access to quality healthcare. Like the Sedera medical cost-sharing community, for example. Membership with Sedera is offered through Scoop Health and members have no network and no limits on sharing according to an easy set of member guidelines. This means that healthy employees don’t have to pay up for health insurance they will never use. Medical cost sharing is typically 40-60% less than individual health insurance costs so healthy families love it. Employees with ongoing medical needs or expensive pre-existing conditions are likewise free to use open enrollment to select an individual health insurance plan that better suits their needs as an individual or family.
Scoop Health: Your Ultimate ICHRA Partner
Using the new ICHRA plan as part of an employer benefits strategy means more and more employees are able to explore more affordable, non-traditional health insurance alternatives. Like medical cost-sharing, Direct Primary Care (DPC), and Virtual direct primary care for example. Employees appreciate the no cost unlimited access to everyday care, and more affordable ways to pay for the employee’s big medical needs like this.
Some companies already using ICHRA plans as part of their employee health benefits strategy are seeing up to 80% of employees will choose the medical cost-sharing option over health insurance. Medical cost-sharing offers a much greater value when compared to high deductible health insurance. When only 20% take health insurance through ICHRA the remainder opt-out to take up the employer’s subsidy towards medical cost sharing instead. This significantly reduces the cost-to-company for employee group health benefits. This earnings add back means that employers can invest that money into growing businesses instead of wasting money to buy health insurance for healthy employees. The monthly cost of Scoop Health’s medical cost-sharing membership with Sedera is like 30-60% lower than traditional health insurance premiums. And you will never get an ugly renewal ever again. Employers who use an ICHRA strategy never have to tell employees that the deductible is going up, again. Using an ICHRA strategy means no annual headbanging trying to pick a health plan that your employees won’t hate. Seriously group health insurance has gotten so bad that some employees would rather have no coverage than pay the employee portion of the premiums. Those are the same employees who love medical cost sharing and virtual primary care combined in an ICHRA strategy.
Just like with the 401K, employees will appreciate the employer’s gift of choice when it comes to health benefits, a very personalized thing. An ICHRA strategy will give every employee the freedom to choose the health solution that is right for their individual situation regarding health and personal finances. With Scoop Health’s medical cost-sharing community, it is hard to imagine a scenario where we wouldn’t be the right fit for your employees. With an ICHRA strategy, every possible option is available for employees to pick from, the employer is just the financial sponsor.
Scoop Health’s Medical Cost Sharing – Powered by Sedera
Medical cost-sharing is healthcare based on community guidelines to meet each other’s medical needs. Its not like the situation where health insurance gets to call all the shots. Members can see any doctor anywhere and are not limited by network restrictions or annual caps. They are able to choose their healthcare providers and make their own decisions about what care is best for them.
Scoop Health designs and implements ICHRA strategy for employers of any size both small and ALE according to the Affordable Care Act, can now replace and offer employees something better than group health insurance by using a good ICHRA strategy. Using a range of provider options with regards to everyday care. From Virtual Primary Care to Direct Primary Care where both are membership programs that offer your employee unlimited access to their own personal doctor. Obviously one is an in-person doctor and the other is virtual only 1;1 doctor. With an ICHRA strategy members also get easy access to low-cost labs, x-rays, scans, and medications. Sedera members even get a nice membership discount for having a VDPC or DPC doctor.
ICHRA, DPC, and Sedera are the perfect combination for a great employee benefits strategy that gets rid of group health insurance, for good. . Scoop Health’s medical cost-sharing community will reimburse the big stuff, while VDPC will be available to help every employee to talk through everyday healthcare needs.
Get Your Invitation
If you are interested in Scoop’s medical cost sharing community and what we have to offer your business, check us out. Let us help you structure your ICHRA plan and calculate how much your business could be saving on employee health benefits.
To learn more about the benefits of an ICHRA plan and how you can get a free analysis of your business using an ICHRA health benefits strategy, visit www.scoophealth.com/ICHRA.
We host ICHRA strategy webinars with Sedera, ICHRA plan experts, and VDPC providers. If you are an employer offering or considering group health benefits, email us at firstname.lastname@example.org to get on our invitation list!