Known as the individual coverage health reimbursement arrangement, or ICHRA, is an alternative option that emerged under the Trump administration as a proposed expansion to the Qualified Small Employer Health Reimbursement Arrangement, itself a product of the 2016 21st Century Cures Act.
Brad O’Neill, president of The ICHRA Shop, himself is no stranger to the effects of the “Great Resignation.” He left his role with Fidelity Investments in 2020, “in the middle of the pandemic,” his employee biography on The ICHRA Shop website notes, “to create a new way to Shop, Enroll and Administer health insurance.”
He went on to explain another major benefit to employers by offering ICHRA instead of traditional health care benefits packages: there’s no longer a need for the employer to shop the vendors and select the plans — and, importantly, have to explain those plans, he said. And if you’re an employee who already has health insurance and is happy with that plan, there’s no need to switch, he continued.
“We just hit 5,280 members signed up in just a year and a half, so we’re seeing this shift right now from group health insurance to employers looking for something a little different,” O’Neill said during his presentation during the ACRA meeting.
But what does that mean for health care? As smaller organizations and businesses are putting together fiscal-year budgets, and the labor landscape looks as unnavigated as ever — all while some community members who have made life-changing decisions about their employment situations find themselves needing to figure out health care options — the Aspen Chamber Resort Association attempted to answer that question, or at least give some preliminary information on a newer option.
Essentially, the ICHRA is to health care benefits packages what the 401(k) became for then-traditional pension retirement plans — that is, an employer offers a matching amount to an employee’s own financial contribution to a plan and then is able to choose to where that combined allocation goes. It’s particularly great for smaller organizations and businesses that otherwise couldn’t afford to offer full health care benefits to staff, proponents who presented during the May ACRA meeting maintained.
“If you have that already and you’re not getting a premium tax credit from the government, it’s really easy — you don’t have to enroll,” O’Neill said. “No more do the employees call the employers about health insurance. You’re out of the game — you call the broker. There’s no need to call your employer anymore.”
John Kelly, founder and CEO of Minneapolis-based health insurance tech startup NexBen, was also at the ACRA virtual meeting. Kelly touted “anywhere from a minimum to 25 to 65% savings” for employers who adopt the ICHRA model.
“We work with brokers and insurance companies all around the country, so with NexBen, we’re the technology that powers a lot of things up,” he said. “Really what it is … it is a group health plan; the employer is offering a group health plan; the difference is, just like a 401(k), it’s a defined contribution.” That’s great for organizations that traditionally didn’t have the budget to offer staff any sort of health care package, said Colin Laird, executive director of the Third Street Center in Carbondale and satisfied ICHRA customer.
“We provided group health insurance to our employees,” he said. “We kept seeing our group plans going up every year. [From] 2000 to 2001, it was going up about 10%, so our plan was to raise the salaries of our employees and just go on the marketplace, and it would all be taxable income. Then we learned about ICHRA, contacted Brad and it was a very seamless process working with him that now allows us to support our employees pre tax like we did before. It’s a group plan, but it’s individually focused. We saw our cost drop to the organization about 22%.” Additionally, he said, one of the nonprofit entities that operates out of the hub was able to offer benefits to staff for the first time.
“We’re very pleased; we’re able to offer what we’ve been able to offer in the past [for less]. And we have an organization that has been able to offer employees insurance for the first time.” But not everyone is such an enthusiastic fan of the model. Going off the 401(k) analogy, it isn’t difficult to find think tanks and economic research demonstrating that the shift in retirement plans has been a detrimental one to the average American worker.
“That has been a great experience for them because up until this point everyone was kind of on their own, and now the organization is able to support their health insurance choices and make sure all the employees have health insurance because unfortunately some of the employees did not,” he said of the Third Street Center tenant previous cited as an example. What it all means going forward is still to be seen, Connect for Health Colorado CEO Kevin Patterson noted.
Still, given the choice between offering health care plans and not being able to do so at all, Laird maintains that the former is the better option. “The shift from traditional pensions to individual savings has widened retirement gaps. In addition to retirement wealth not growing fast enough, retirement disparities have grown with the shift from traditional pensions to retirement savings accounts,” argues the Economic Policy Institute in a published study entitled, “The State of American Retirement: How 401(k)s have failed most American workers.”