More employers are turning to Individual Coverage Health Reimbursement Arrangements (ICHRAs): the number of employers who adopted ICHRAs increased by 64% between 2022 and 2023, according to the HRA Council. Still, many employers aren’t super familiar with the model, industry experts say.
ICHRAs first became available in 2020 and are an alternative to traditional group plans. They allow employers of any size — though smaller employers may particularly be interested — to provide a tax-free reimbursement to their employees so they can shop for a health plan of their choice, including through the individual ACA market on state exchanges. The amount employees are reimbursed varies based on several factors, such as age, family size or where they live.
“This allows you as an employee to go out and get what’s best for you,” said Andrew Reeves, ICHRA general manager at Gravie, a Minnesota-based company that helps employers administer ICHRAs.
Gravie recently published a survey of 500 employers that showed 89% of those who don’t currently offer ICHRAs are considering administering them over the next three years. However, many were in the dark about ICHRAs before taking the survey: 49% of the respondents hadn’t heard of ICHRA.
In fact, the lack of knowledge on ICHRAs is the biggest barrier to adoption for employers, said Kyle Estep, vice president of policy and strategic partnerships at Take Command. The Dallas-based company also helps employers implement ICHRAs like Gravie does. Its employer customers — which include a Texas church, a fintech startup and a restaurant chain — offered a monthly average reimbursement of $513 for single employees and $1,373 for families between August 2022 and August 2023.
“I would say we are absolutely seeing growing interest,” Estep said in an interview. “But there’s still a need for additional education. Because frankly, these funky acronyms are quite intimidating, and you gotta have someone who can help make it simple for folks to understand.”
Gravie’s report found several other barriers to implementing ICHRAs, including helping employees navigate the marketplace, staying compliant with regulations and providing ongoing support for employees’ questions.
Most employers want their advisors to provide them with information on solutions like ICHRAs, with 86% of respondents saying this in the Gravie survey.
“Employers are getting double-digit increases on their employee benefits plans. They’re looking for some type of solution that will let them say, ‘Hey, here’s how much I’m going to contribute,’” Reeves said.
What employers benefit from ICHRAs? Estep said two groups are emerging in the market. The first is small employers, like those with under 50 employees, who are new to offering a benefit and may be “intimidated” by shopping for a group plan. The second are those who are experiencing issues with their existing group plan, such as the plan not offering access to certain facilities in employees’ geographic areas.
“One of the challenges that employers face is, ‘Hey, you may offer another insurance company but that insurance company doesn’t offer access to the Kaiser Permanente health care facilities in the region,’” he said. “By setting up a program like an ICHRA you create employee choice. Now those employees who want Kaiser Permanente can go get it and those who want Blue Cross, they can go choose that.”
According to the HRA Council, most employers offering ICHRAs are small businesses, but companies with more than 50 employees offering ICHRAs are growing rapidly. Between 2022 and 2023, this population grew by 144%. Gravie’s report showed that 92% of employers with 50 to 299 employees and 94% of employers with 300 to 1,000 employees are interested in learning about ICHRA options, showing that employers of all sizes are open to ICHRAs.
Estep expects continued growth in the adoption of ICHRAs.
“I think by the end of this decade, we will see millions of employees across the country getting their health insurance via this new method and getting more choice and freedom to pick what’s best for them,” he said.
Photo: Feodora Chiosea, Getty Images