Employers Show Interest in Moving to ICHRAs

by Peter Johnson

Health care industry insiders say that employers of all sizes are beginning to take a serious look at moving some of their health benefits to Individual Coverage Health Reimbursement Arrangements (ICHRAs) starting in 2022.

In July 2019, the Trump administration finalized new regulations for ICHRAs, giving employers greater flexibility to reimburse qualifying employees buying health insurance policies on the individual market.

While the new ICHRA regulations took effect starting in the 2020 plan year, adoption has been slow so far. That could be changing: a Nov. 16 survey by Willis Towers Watson of large, national employers found that 15% of respondents are "planning to offer or considering offering ICHRAs to at least some portion of… employees in 2022 or later."

Jason Karcher, an actuary at Milliman Inc., explains that, while ICHRAs do offer employers a real advantage by reducing the administrative burden of managing health benefits, it's not clear they save employers money.

"The individual market is frequently more expensive on a benefit-for-benefit basis than what you find on the employer market," Karcher explains. "So if you're looking to offer something with value, it's not like it's an excellent savings."

Ashraf Shehata, the national sector leader for health care and life sciences at KPMG, says that the administrative question alone is driving interest in ICHRA. While Shehata agrees that commercial employer plans tend to get better deals on reimbursement, "the feeling is that the offsets to that would be a reduction in administrative costs."

"I think people are looking for more ways to give consumers choice in their health benefits," Shehata adds. "The only way to do that today, in a more structured benefits model, will actually drive up your administrative costs as an employer. So if you can forgo some of the tax advantages, but you pick up a reduction of your administrative burden and you empower the employees to select their own plans, that could be a very interesting model."

Katherine Hempstead, senior policy adviser at the Robert Wood Johnson Foundation, suggests that the incoming Biden administration's stated intention to peg the benchmark for premium tax credits to the second-lowest cost gold plan instead of the current silver benchmark would make ICHRAs much more appealing to employers, as it would allow enrollees to more easily afford lower-deductible plans.

From Health Plan Weekly