- Key insight: Discover how committing to multi-year ICHRA deployments can stabilize escalating employer health costs.
- What's at stake: Short-term renewals risk eroding broker value and increasing employer benefit volatility.
- Forward look: Expect brokers to pivot strategically or cede clients if they ignore ICHRA expertise.
Source: Bullets generated by AI with editorial review
With both fully insured and self-insured group health plan premium increases exceeding the rate of inflation in recent years, benefit brokers and advisers have grown accustomed to white-knuckling their way through annual renewals.
But it doesn't have to be that way, according to proponents of individual coverage health reimbursement arrangements known as ICHRAs. They suggested locking in this emerging alternative to traditional health insurance coverage over a three-to-five-year time horizon to help stabilize soaring health benefit costs.
Transitioning to an ICHRA is a labor-intensive process that lends itself to more of a long-term strategy, explained Barry Fields, a partner in the employee benefits division of The Baldwin Group, noting the need for education, decision-support tools and hand-holding.
"We find that there's a lot of anxiety during open enrollment, especially the first year," he reported, "but once they get their ID card and they're all settled, the plans run pretty well."
Since ICHRAs represent such a significant change, the idea behind making a longer-term commitment is to minimize disruption and friction while allowing ample time to bear fruit.
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"With five renewal cycles under our belt now, what we're seeing with early adopters who want to shop ICHRA every year is that it just disrupts so much of the flow, choice and experience," observed Jack Hooper, founder and CEO of Take Command Health, a pioneer in the ICHRA and qualified small employer health reimbursement arrangement arenas.
But he hastens to add that those who have stuck with the model, understand how it works, and excel at communicating its value have rebuilt some of their HR and benefit practices around the model, and employees know exactly what to expect.
Likening ICHRA adoption to retirement savings, Hooper noted that advisers serving this space aren't selling clients 401(k) plans based on how investments are expected to perform over the next six to 12 months. Rather, it's about helping employees understand their long-term needs and making more thoughtful choices.
Adopting this mindset and focusing on long-term projections shifts the conversation toward accruing HRA and health savings account (HSA) balances over time. "There's real value in that where there wasn't when you're just going year to year to year," he added.
More choice, lower costs
For employees, this model opens up a much wider range of coverage choices, which can be at once empowering and overwhelming. "It gives the employees on average five or six different insurance carriers and 50 to 100 plan options to choose from," Fields said. "So, there's always a plan that'll best meet the employee's needs in terms of level of coverage."
Employers are finally warming up to ICHRAs. Four or five years ago, Fields said his clients would quickly change the subject when he presented it as an option, but then two or three years ago they'd want to learn more.
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Now, they're wanting to take a closer look because the group health insurance market has become increasingly more expensive relative to the individual market. In fact, one of the biggest value propositions to consider is that individual-market plan renewals have been better than many group health programs, according to Fields.
Many brokers misunderstand how the individual market works, Hooper explained, noting that using the employer as an underwriting unit in group health benefits doesn't automatically translate into a better deal.
"All you're doing is just regressing to the mean of employee health across the country, but that's what the individual market does," he said. "The way the risk-transfer mechanisms work is you're actually buying into a 20 million-strong risk pool. Yes, we saw increases this year due to inflation in some other areas, but they're all very predictable."
Brokers and consultants will lose business if they don't quickly become comfortable with ICHRAs as an option for their employer clients, Field predicted, equating it to not embracing HMOs in the 1990s or HSAs and HRAs in the early 2000s.
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When pitching the idea of sticking with an ICHRA for several years to his company's top brokers at a meeting two months ago, Hooper noted that it was initially met with laughter. But several follow-up conversations helped move the needle on their understanding of why it's important to adopt a longer view of ICHRAs.
While many brokers boast about delivering multiple plan options to employer clients each year, he cautioned that this approach is becoming harder for them to justify their value and worth.
"What's really going to make a difference for brokers is being able to take that strategic advising role and say, 'We're looking beyond one year. Let's talk through the change management. Let's look at growing HRA or HSA balances,'" he said.
This is the first article in a two-part series. Stay tuned for part 2.
