Why employers consider ICHRA

Why would employers consider an ICHRA, and what should they consider?

Employers consider an ICHRA for a couple of reasons:

1. Group insurance isn’t viable.

Maybe they can’t make participation, maybe they’ve had a bad run of claims and their rates are too high. Whatever the reason, ICHRA presents as a fall-back safeguard when group insurance isn’t viable.

2. The employer wants to run a business, not a health plan.

For all but a handful of companies, running a health plan is not a core competency. They’d rather develop software, build swimming pools, or make delicious food. Running a health plan, with its increasing compliance burdens is a challenge that can distract from accomplishing the core mission of the organization. ICHRAs have their own compliance BTW - but the burden is a bit lower.

2a. Employee Choice.

The employer wants to give employees choice. This is 2a and not 3 because it’s a complementary consideration. When an employer runs the plan, they make a handful of choices and it applies broadly. With an ICHRA, each employee chooses the plan that works best for them (within their ZIP code).

3. Greater Cost Control.

This ties into reason #1. Since group underwriting generally requires a minimum participation threshold, employer contributions must often be well above the baseline for affordability under the employer mandate. ICHRA has no participation requirement, so employers can baseline contributions on ACA affordability metrics and satisfy their obligations.

In future years, the employer’s affordability calculations are tied to bigger risk pools than their own, benchmarking to a plan that the state is motivated to sustain as affordable.

Tomorrow I’ll share my thoughts on why employers may not want to choose an ICHRA, but before then - what other reasons have you seen for employers to choose an ICHRA?

Side note: this is my first gif generated with SORA, which is still struggling to get hands and text right. Are you using SORA for anything yet?