Insurance plan binder As the nameimplies, ICHRA is based on reimbursing employees for insurancerather than buying it for them.(Photo: Shutterstock)

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With benefits season in full swing, it's time to make smartchoices for your company (or your client) on how to spend healthcare dollars for 2020. This open enrollment will be different thanprior years, as there is a new HRA that is predicted to change the modelof employer sponsored health care. While health reimbursementarrangements are often faced with limitations, the new IndividualCoverage HRA (ICHRA) is radically different. So much so, thatHHS projects that in the next 5 to 10 years,roughly 800,000 employers will offer Individual Coverage HRAs topay for insurance for more than 11 million employees.

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But the truth is, this new model of benefits isn't perfect foreveryone. Certain types of businesses, certain locations andcertain company configurations will benefit more from the new HRAsthan others. Here's how to decide which route is best—thereimbursement arrangement model or the traditional, employer-basedgroup plan.

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Related: How employers could run afoul of expanded HRArules

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But first, let's start with the basics of ICHRA.

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How the new Individual Coverage HRA works

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As the name implies, ICHRA is based on reimbursing employees forinsurance rather than buying it for them. At a high-level, the wayICHRA works is very simple:

  • Employers design their plan, including establishingreimbursement limits and defining which employees are eligible.Employees can be divided by classes (full time, seasonal, parttime, salaried vs. non-salaried, etc. and each class can beextended a different level of benefit—varying reimbursement amountsor even in combination with a group plan.
  • Employees purchase the individual plans they want.
  • Employees submit claims for reimbursement.
  • Employers reimburse employees for valid claims.

How ICHRA stands out from other HRAs

  • ICHRA is not required to be offered alongside a traditionalemployer sponsored group plan like traditional Section 105HRAs
  • It's available to employers of all sizes unlike the QualifiedSmall Employer HRA (QSEHRA), which is available to employers withfewer than 50 full time employees
  • It allows employees to opt out of an HRA unlike QSEHRA and thenew Excepted Benefit HRA (EBHRA)
  • Employer can set contribution amount without limits (similar toSection 105 HRA, but QSEHRA and EBHRA have restrictions)

When HRAs are a better option

  • Are employer-sponsored group health plans too expensive foryou?
  • Are annual increases in pricing for group plans stressful toyour budget?
  • Do you want to only offer some of your employees (like fulltime) benefits but not others?
  • If you could, would you offer a group plan to your mostvaluable employees but contribute much less for seasonalworkers?
  • Do you worry about minimum participation requirements?
  • Is it stressful to choose one plan for a diverse group ofworkers who all have different health care needs and differentpreferred doctors?
  • Is it a headache to administer a group health plan?

If the answer is yes to any of the questions above, an ICHRA maybe the way to go.

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Here are a few other arguments in favor of an IndividualCoverage HRA benefits solution.

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Budget prioritization: The 11 classes andunlimited custom class options allow employers to focus theirhealth care spend on the most crucial team members. Want to offersalaried works a group plan and non-salaried workers $300 a month?The ICHRA can make that happen. Want to offer differentreimbursement amounts to your seasonal crew than your full-timers?That works too. Want to keep your group plan for existing employeesbut offer an HRA to anyone new? You can do that as well.

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Cost predictability: Define yourbenefit budget and stick with it. No more surprise group increasesyear after year.

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Plan customization andflexibility: Design a plan that fits your teamvs. being locked into what an insurance company offers.

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Risk de-management: Take managing youremployees health risk out of your business plan. Networkflexibility: give your employees the ability to choose plans anddoctors that work for them.

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Plan portability: Employees own theirhealth plan and can take it with them if they change jobs.

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Plan choice andpersonalization: Employees select individualplans that fit their needs (doctors and Rx coverage).

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Employee experience: Individualinsurance companies can provide a superior experience with apps andconcierge services.

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No minimum participation concerns: Most groupplans require employers to maintain a high participationrate—typically around 70 percent. This can force employers to offermore generous and expensive benefits than they may have otherwisein order to keep the plan intact.

When employer-sponsored group plans are still king

As mentioned above, the ICHRA has some serious advantages, butit isn't for everyone. Let's start with a few more questions forbusiness owners to see if a group plan might be a betteroption.

  • Are the prices on the individual market way more expensive thanwhat you'd find in a similar group plan?
  • Are there limited plan options in your area on the individualmarketplace? Is there only one carrier available where youremployees live?

If the answer is yes to the above questions, a group plan willprobably keep everyone happier, despite the higher costs.

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Here's what to consider:

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Provider networks: If you're in an area wherethe individual plans have a narrow HMO or EPO based network, groupplans in the same area will likely have better options.

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Individual plan pricing: For much of thecountry, individual plans are more expensive for similarcoverage.

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Amy Skinner is an individual coverage HRAexpert at Take Command Health, an HRA solution thatalso provides a private insurance exchange.


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