- Key insight: Discover how ICHRAs can convert hidden savings into sustainable benefit-cost reductions.
- What's at stake: Employers risk lost competitiveness and cost volatility by dismissing ICHRAs prematurely.
- Forward look: Expect broader employer adoption as brokers learn ICHRA mechanics and refine guardrails.
Source: Bullets generated by AI with editorial review
(This is part 2 of a two-part story;
Benefit professionals who are willing to make a longer-term commitment to individual coverage health reimbursement arrangements known as ICHRAs with meaningful guardrails in place will notice dramatic results.
Switching from traditional group health insurance to this
alternative model carries with it the potential to not only stabilize employee health benefit costs but actually return dividends hidden in plain sight. But it cannot be done without reasonable benefit allowances and savings accounts established alongside clear communications and member advocacy.
Barry Fields, a partner in the employee benefits division of The Baldwin Group, believes employees have similar, if not better, buying power with an ICHRA than under the consumer-driven health model of the late 1990s. The trick is setting a budget that's affordable to employees with enough of an allowance to pay for coverage that's comparable to what they had under a group health plan.
"It's certainly worth considering changing gears," he said.
Five years of renewal cycles involving ICHRAs have allowed for a build-up in health reimbursement arrangement (HRA) and health savings account (HSA) balances, according to Jack Hooper, founder and CEO of Take Command Health, a pioneer in the ICHRA space.
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"If I built up $5,000 or $6,000 in my HRA or HSA account, that bronze plan with a $6,000, $7,000, $8,000 or $10,000 deductible isn't as scary after two or three years, and I'm willing to buy down and save several hundreds of dollars a month on premium," he explained.
Flexible doesn't have to mean more expensive
These examples have surfaced in the face of cost volatility with both fully insured and self-insured health plans. Hooper described ICHRAs as "sailing smooth through choppy waters" thanks to the accumulation of savings-account balances. As a result, he said health plan members don't have to worry about first-dollar care as much anymore.
Although counterintuitive, one recommendation he's making more often is to resist limiting an ICHRA to premium-only to help empower plan members. For example, if $800 a month is allocated to employees, he said what happens is a tendency to buy the silver or gold plan to maximize premium dollars.
"We're trying to challenge brokers, employers and employees to not think of solving everything with premium dollars," Hooper reported. "If you make the ICHRA more flexible, people think, 'Oh, that's going to make it more expensive,' but it's actually the opposite."
By broadening that monthly allocation to pay for both insurance and medical expenses, employees may be more inclined to choose a high-deductible bronze plan that enables them to accumulate extra dollars to finance co-pays on doctor visits, prescriptions, eyeglasses and other related expenses.
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In that buy-down scenario, employees that are allocated $800 a month and decide on a $500 premium would accumulate $300 each month by the end of the year. "We encourage employers to reset it," he said. "It's not use-or-lose-it like an FSA where the IRS takes the money. It just stays with the employer."
Hooper finds that some percentage of those employees, more than people expect, will not spend all their allowance, which means the employer keeps that money. Therefore, he said increasing plan flexibility actually brings costs down and delivers a better experience.
Many of Fields' fellow brokers and consultants haven't yet drunk the Kool-Aid on ICHRAs or learned what the model is all about, he noted. "They're very quick to dismiss it if their clients bring it up, but more and more clients are going to bring it up now because it's becoming more of a household solution," he observed.
