The relationship between employers and employees is complex and fragile. Employers who invest in the wellness of their employees find that their employees are more invested in the health of the business. But with premiums so high and so many options to consider, choosing the right health benefit for employees is challenging. Because everyone’s health and financial situation are different, health benefits are never, one size fits all.
How can you expect one health insurance policy to support so many different needs?
Healthcare Reimbursement Arrangements (HRAs) have been around for a long time, and NOW they are finally worth investigating. The new Individual Coverage HRA, (ICHRA) became available at the start of 2020 and it’s much better than any HRA ever before now.
What is ICHRA?
ICHRA is an HRA that is funded by employers with pre-tax dollars. The HRA reimburses employees a set amount that they can use to purchase their own choice of traditional individual health insurance. . If the employer contribution isn’t enough to pay for the insurance the employee chooses then employees pay the difference out of their paycheck. . There is no limit on an employer’s contribution to the ICHRA, and employee reimbursements can be done differently by classifications, like part-time or full time. Contributions can also vary by location and age.
ICHRA launched in January 2020 allowing employers to contribute dollars and give back choice to employees. They appreciate the employer contribution more than forcing one or two employer selected plans to choose from. People want more control over their healthcare than they get with group health insurance plans.
Employees are free to opt-out of the ICHRA and use Premium Tax Credits to purchase on the healthcare exchange. For employees who opt out of the ICHRA, an employer is also free to subsidize an employee’s purchase of more affordable alternatives to health insurance, like Medical Cost Sharing and Direct Primary Care. Oftentimes the employer subsidy will cover 100% of these costs but not the individual health insurance premiums. This leads as many as 80% of employees to choose medical cost sharing vs health insurance.
Why is ICHRA a Big Deal?
Everyone wants affordable and accessible health benefits included in their employee compensation package. Most people see it as a critical factor when choosing a new job. . But, health insurance can cost employers an arm and a leg. Most of the time, the group policy selected by the employer and the insurance broker doesn’t suit everyone at the company anyway.
It’s like a punch in the gut when the medical insurance you’re paying for fails to meet the basic healthcare needs of your employees. They frequently end up spending more money out-of-pocket on top of what you’re already paying.
With group health insurance, it feels like no one wins, except for the insurance providers.
It’s That Time Again
Even though this year has been a rough ride, the time has come, once again, for business owners to choose a healthcare package for their workforce. One that your employees will actually think of as a true ‘benefit’ and appreciate. Especially since you are spending so much to try and keep your employees happy
In the wake of a health crisis, the cost of the options is going to be even more overwhelming this year. It won’t come as any surprise that premiums are going to seem daunting.
Compound Spending
Plenty of times we see health insurance premiums go up by 10% or 20% year over year. It’s hard to keep up with increases like that even in the best of times. This year, it’s going to be even harder.
It’s a lot like compound interest. The longer you’re paying insurance premiums, the bigger the increase year after year. And the real joke? Your health insurance broker still gets a percentage of what you spend even as it goes up. So you’re paying for advice, but the more you spend, the more your advisor gets paid.
Employers need health insurance brokers because the health insurance industry made things so complicated. It’s almost too convoluted to understand if you don’t know the jargon. But when insurance brokers earn a percentage of your premiums. Can you really blame them if they don’t tell you about more affordable alternatives? Options like medical cost-sharing paired with an ICHRA and Virtual Direct Primary Care could easily slip under your radar.
One-Size-Fits-All
There is no one-size-fits-all approach to healthcare.
Employees vary in age, gender, health, wellness, priorities, and many, many other ways. So why would the same healthcare insurance suit them all? This is where ICHRA comes in handy. Instead of Employers picking a plan, employees get the freedom to choose what’s best for them. They appreciate spending the employer’s dollars to pay for it, whatever it is they choose.
How Does ICHRA Work?
I know what you’re thinking. ICHRA is just another complicated healthcare strategy designed to confuse and confound while the insurance company extracts money from you. . But don’t worry. It’s not that at all.
ICHRA gets an employer out of the health insurance business forever. It might actually be the thing that simplifies your healthcare benefits package in a way that your employees will appreciate.
In case you were wondering, ICHRA stands for Individual Coverage Health Reimbursement Arrangement and it just came into existence in 2020.
The whole idea was designed to give employees better health benefits and prevent employers from getting forced into the employee health insurance business ever again. . Group health insurance policies are routinely expensive and on top of that, they’re not normally flexible or able to cater to the health care needs of your entire workforce.
Using an ICHRA strategy, businesses offer employees a monthly allowance that they can use to purchase individual health insurance and other ‘qualified healthcare benefits’. This HRA is funded by the employer with pre-free funds.
This means that, with ICHRA, employees can buy the individual health coverage, and qualified health services they really want. They will be better able to find a health plan that suits their individual circumstances and needs. All you need to do is use the ICHRA to reimburse them up to the agreed-upon amount.
Businesses of all sizes can offer ICHRA. They can also offer employees from different classes different ICHRA allowances. There are 11 classes of employees. The classes are based on things like whether they work full-time or part-time and whether they earn a salary or an hourly wage.
It looks like the ICHRA appears to be the flexible healthcare benefits program that is designed to take care of employers and employees alike, where everybody gets what they want.
How is ICHRA Different From Normal Health Insurance?
With ICHRA, employers have total control over their budget for Employee Benefits. Employees are also given the freedom to find the best healthcare option to suit their needs. ICHRA even allows for employees to potentially be reimbursed for additional healthcare costs. This can include prescription medication or labs.
It gives both employers and employees flexibility. With most medical insurance policies, you can’t say the same with coverage limits and network restrictions. With ICHRA, your employees will be able to pick a health plan that suits them and their family and that offers flexibility and easy access to quality healthcare. Like the Sedera medical cost-sharing community, for example.
What Steps Do You Need to Follow to Make ICHRA Work?
Health Reimbursement Accounts have rules and a process that you must follow.
- The company must offer affordable coverage to every benefits-eligible employee, based on the ICHRA rules.
- The company must decide on the size of the allowance that will be given to the employee. This can vary with age, location, and employee classification.
- The employee will have an exchange to use in finding their own individual health plan. This could be traditional health insurance, or something more dynamic and affordable, like medical cost sharing.
- The employee must then submit proof-of-payment to their employer for the healthcare plan of their choosing.
- The HRA will reimburse the health insurance or the company can reimburse the employee directly for medical cost sharing and/or Direct Primary Care.
The most important job of the employer is to decide how much money to allocate to each of their employees. The chosen amount must meet ‘Affordability’ testing as defined in the Affordable Care Act. Each month, this agreed-upon amount must be made available to each employee.
The employee is then free to shop for healthcare that is best suited to them and their family. They can spend more than their ICHRA allowance. But the employer will only reimburse the employee up to the agreed-upon amount. This is why ICHRA is a more dynamic option. People can decide how much they need to spend, and the employer is not forced to cover any higher costs than budgeted amounts.
Once the employee has reached a decision, they will pay for their healthcare choice with a combination of the employer’s HRA contribution and their own money. Once everything is set up the company offering an ICHRA option will reimburse the employee out of pre-tax HRA funds, up to the amount specified.
A Proven Alternative
With new options like ICHRA, employees are able to opt-out of the ICHRA and shop for affordable alternatives to health insurance. They can use Premium Tax Credits on the Exchange without triggering a penalty for the employer. This added flexibility will benefit employers and employees.
ICHRA makes it possible for more and more people to enjoy non-traditional options like medical cost-sharing and direct primary care. Employees appreciate being given more affordable choices like this. It goes a long way towards employee retention when your employer contribution covers 100% of such a great health insurance alternative as Sedera Medical Cost Sharing.
With a good ICHRA strategy, it’s not unusual to see 80% of employees choose the lower cost medical cost sharing option. This drastically reduces the cost-to-company for employee health benefits. This means that employers can use that money to grow the business or make investments into retained earnings instead of health insurance.
Scoop Health Medical Cost Sharing is Powered By Sedra Health
Medical Cost Sharing is healthcare based on a community reimbursement model, not one where health insurance gets to call all the shots. There are no network restrictions and members are free to get the care they need, wherever they are and from any provider they choose.
If you want to find out more about Scoop’s medical cost sharing community and what we can offer you and your employees, check this out. We can help you structure your ICHRA plan and calculate how much you could be saving.
Instead of paying a huge annual deductible, members of our cost sharing community pay a low initial unshared amount. After that IUA (Initial Unshareable Amount), all the medical bills for any incident are fully shared by the community.
Also, find out more about what we can offer families for better everyday care. Direct Primary Care DPC is an exciting new membership-based primary care program. Among other benefits, it gets you unlimited access to your own personal doctor, as well as low-cost labs, x-rays, and medications all for one low monthly membership rate. Sedera members with an approved DPC or Virtual DPC get a membership discount. Scoop Health can help you find the best DPC and VDPC options available in your area.
DPC and Sedera go together like cookies and milk. It’s the perfect match-up. Scoop Health’s medical cost sharing for the big stuff and DPC for all your routine everyday care needs.
A Better Solution
The people we trust to give us advice on healthcare are the same people that profit off of our purchases. Employers want to look after their employees, but they need help getting it right.
With new options like ICHRA, employees can investigate affordable alternatives to health insurance. This way, we can work together to provide a better solution for all.
Contact us to learn more and sign up today!
