An ICHRA Guide for Employers

Another major advantage is that ICHRAs can be offered by class. For example, an employer can offer a GHP to the salary class and an ICHRA to the hourly class. Many ICHRAs are a total replacement for GHPs, employers have the choice of what is offered by class (not the employees). This is a big decision for the employer. It is important to understand that the GHP can be offered to the employer’s choice of class of employee. It is not the choice of the employee to go to GHP or ICHRA.

ICHRA Pros and Cons

One of the first steps employers should take is to assess whether an ICHRA is an appropriate fit for their organization. Employers should evaluate the organization’s workforce composition, turnover rate, and budgetary considerations to determine if an ICHRA aligns with the company’s long-term goals. By using these data-driven insights, company decision makers can make informed decisions on whether to adopt an ICHRA or consider alternative benefit solutions.

Cost Control

With traditional group health insurance, employers face unpredictable premium increases each year, and controlling costs can be challenging. An ICHRA, however, allows employers to establish a fixed monthly contribution per employee, which helps stabilize benefits costs over time. This requires careful analysis of the organization’s financial capacity, as well as strategic planning to ensure the contribution rate remains attractive to employees. Please take note once again that employers can structure contribution amounts based on certain employee classes. Plans can be offered to the following classes: hourly/salary, FT/PT, seasonal, geographic location, employees of a CBA, temporary employees of staffing firms, employees who have not satisfied a waiting period, non-resident aliens with no US based income.

Compliance

Employers should be aware of several compliance requirements that exist regarding an ICHRA, including adherence to the Affordable Care Act (ACA), IRS guidelines, and anti-discrimination rules. For instance, under ACA regulations, employers offering ICHRAs must ensure that the individual plans selected by employees meet minimum essential coverage (MEC) requirements. This can be particularly challenging when dealing with a diverse workforce that may select varying levels of coverage. Although employers have some flexibility regarding eligibility criteria, they also need to verify that employee classes are defined according to regulatory standards, and ensure contributions are compliant with IRS guidelines. By proactively addressing these compliance issues, employers can avoid costly penalties and foster a smooth implementation process.

Education

Unlike more traditional group health plans, where employees have limited options and typically follow a structured enrollment process, ICHRAs require employees to independently select individual health plans. This shift can be overwhelming for employees who may not be familiar with the marketplace or how to compare insurance options. As a result, employers should design and facilitate educational sessions, workshops, or one-on-one consultations to guide employees through the selection process, helping them understand their health needs, compare different plans, and make informed decisions. This support is particularly important for businesses with a varied workforce, as it ensures that all employees-regardless of background or insurance knowledge-are equipped to navigate the individual insurance market effectively.

It is important to note that those individuals covered or eligible for Medicare can be reimbursed only if they are in a class that can pick individual coverage. Human resource personnel will find that this may be one of the most often asked questions. An employer CANNOT set up a Medicare eligible class. It’s not one of the choices listed in #4 above. If the employer offers ICHRA to hourly employees and salaried employees get the GHP, then only the hourly employees can be reimbursed (not the salaried).

Finally, once a company adopts an ICHRA for their employees, it is important to solicit feedback from the employee population to ensure that the program remains effective and aligned with the organization’s evolving needs. Periodic reviews of ICHRA utilization, employee satisfaction, and cost efficiency are essential for refining the program over time. By gathering and analyzing this data, decision makers can identify areas for improvement, adjust contribution rates as needed, and consider supplementary benefits to address gaps in coverage. This continuous improvement process allows clients to maximize the benefits of an ICHRA while adapting to changes in the healthcare landscape, employee preferences, and organizational goals.

ICHRAs: How My Benefit Advisor Can Help

My Benefit Advisor (MBA) focuses on providing clients with a vast array of resources to assist them in making educated, needs-focused decisions when choosing their benefits. Through our expert teams, technology, and partnerships with the nation’s leading insurance carriers and service vendors, we provide innovative client specific solutions to help you and your employees with a range of insurance and human resource needs.