Why ICHRA isn't a fit for every employer

Why isn’t an ICHRA a good fit for all employers?

I’ve been talking about ICHRA this week, trying to share some perspective on pros and cons. Yesterday was why an employer would consider an ICHRA, so naturally today is why an employer WOULDN’T.

1. Cost.

Wait, you say “but Chris, I thought this was a big reason employers would go to an ICHRA?”

I did. But each group is different. Ages will make a huge impact on the individual market, and overall health will drive a group plan. If you’ve got a group of Jack Lalanne’s swimming the length of the Golden Gate Bridge shackled and handcuffed, you’re going to do much better in a group plan.

(Group here isn’t just traditional insurance, also think self-funding and all of the cool levers you can pull there).

So for a healthy older group, extreme examples notwithstanding, an ICHRA could be more expensive. The same can be true based on the geography of the group and situs state versus employee residence mix.

2. The employer wants to differentiate health benefits as an attraction and retention tool.

Let’s be blunt. There is a benefit to an employer in running a great benefits program when it comes to attracting and retaining top talent. Done right, it absolutely factors into employee’s decisions to stay with an employer. With 35% of employees looking to change jobs this year (https://lnkd.in/eweMc8vA), investing in benefits as a turnover mitigation strategy is a prudent move.

And you can’t match the flexibility of group plan design with ICHRA. I’m talking about waving cost sharing, leaning into centers of excellence, and direct contracting.

3. Your employees and/or their dependents cross state lines frequently.

A shortcoming with the individual market is that there is very little available in the way of broad national coverage. Plans are generally limited to the state where the individual lives.

What does that mean for people who live in Connecticut and work in Manhattan? For people who share time between New Jersey and Florida? For college kids whose parents live in Oklahoma and go to school in Texas? For sales reps that live in Missouri and support Montana, North Dakota, South Dakota, and Colorado?

Individual plans just don’t meet the needs for use cases like that at this point.

Does this mean ICHRA is bad? No. It’s about identifying fit based on individual factors.

For some groups, ICHRA is a home run. For others it’s a pop-fly foul caught behind home plate. The difference is being able to see the ball before you swing.