ICHRAs: Why This Employee Benefits Plan is Seeing Notable Growth

June 12, 2024

In recent years, employee benefits and health insurance have shifted significantly, reflecting the changing needs of the modern workforce and influencing employer strategies for attracting and retaining their employment talent. In a 2024 report issued by the HRA Council, adoption of the Individual Coverage Health Reimbursement Arrangements increased 29% between 2023 and 2024, with projections of greater growth as more employers and employees become exposed to the newer offerings.

ICHRAs (Individual Coverage Health Reimbursement Arrangements) have emerged as a major innovation, moving away from traditional employer sponsored group health plans. They allow businesses to offer pre-tax health benefits that are tailored to their individual employees’ needs. The concept is straightforward: employers provide a financial contribution, and employees choose from numerous health plans on the open market. Employers then reimburse employees for their premiums and medical expenses tax-free. This approach balances lower-cost options with personalized choices, meeting the evolving demands for customization and flexibility in the workforce.

For employers, ICHRAs offer the opportunity to simplify the benefits process and deliver cost-effective, personalized health programs. However, it requires rethinking benefits strategies, prioritizing employee cost savings and adopting new administrative tools and/or partnering with an informed vendor. Implementing ICHRAs may also involve utilization of self-service portals or AI assistants. Regardless, the cost savings for both employers and employees are significant, often reducing premiums by several hundred dollars per month, making the switch to ICHRAs an attractive option to all parties.

ICHRAs not only increase choice and reduce premiums but also promote benefits equity across the workforce. Additionally, they are community rated with “guaranteed issue”, meaning they have to allow employee enrollment regardless of health status, age, gender or other services that could predict heath service selections. This benefit also applies to ALE’s (groups with 50+ employees). Furthermore, a company’s group claims will not directly impact the premium rates paid each month.

As consumer expectations evolve, employers will continue to adopt flexible, personalized health benefits to attract and retain talent. ICHRAs are transforming health benefits by offering a flexible, tax-advantaged alternative to traditional plans, aligning with the shift towards personalized benefits expected by today’s workforce. If you want to learn more or are curious how ICHRAs can benefit your workforce, please contact your Robertson Ryan Benefits Agent, or contact us here.