1. Individual coverage HRAs (ICHRA) 

It could be argued that the most significant innovation to health insurance since the Affordable Care Act was the executive order written by President Trump in the fall of 2018.  The purpose of this order was to allow employers the opportunity to provide flexible, standalone HRAs by offering employees a budget to spend instead of just packaged health benefits focused on a product offering.

Costs for traditional group plans are going up anywhere from 5% to 15% annually, which is obviously an unsustainable trajectory for any organization's budget.  To alleviate this burden, business administrators will have to either shop carriers and make them compete against each other, or  to make their plans worse.

Health care is personal, so the principle of letting people have personal plans makes a lot of sense.  Promoting competition is at the core of American capitalism, which is something we haven't really seen in health benefits until the past six years.  Additionally, the health of the individual marketplace is very strong (pardon the pun).  The average cost change from 2019 to 2020 is 0% and 78% of individual carriers are increasing coverage and improving their plan designs.

Over the next three years, the White House projects that ICHRAs will see 800,000 employers move nearly 13 million employees away from traditional group benefits and into managed individual benefits.  And when the budget amounts are correctly designed as "affordable" according to the IRS, an ICHRA can fulfill the large employer mandate for the 50+ full-time equivalent market, as well.

2. Frontend HSA + backend HRA 

If you ask most people how good their insurance is, they will often discuss  how much the copay is to see their doctor.  But the problem is that a copay is a very poor definition of quality for any insurance plan.  After all, insurance is the transfer of risk in the case of a traumatic event, not how much it costs to see the doctor for a cold.  Nonetheless, people regularly miss the forest for the trees and pick copay plans because they don't understand them, while missing a valuable alternative solution to traditional group plans.

High-deductible health plans (HDHPs) or consumer-driven health benefits made their appearance in 2003.  The goal was to provide lower monthly cost and allow for tax-free savings in health savings accounts.  The gross savings in premiums could then be saved, according to U.S. Code § 213.  This would also lower the taxable income as additional benefits to the employee.

The benefit of the lower deductible plans are not so much the copays themselves, but more the fact that the coinsurance kicks in sooner.  This is helpful for smaller medical bills; but the reality is that in any  major event, due to the extremely high cost of health care, the most likely situation is that the out-of-pocket limit will be hit.  This is often catastrophic for an individual, and is also a significant contributing factor to medical expenses being the leading cause of personal bankruptcy in the United States.

The irony, however, is that the majority of these HDHPs actually have a lower out-of-pocket maximum than most copay plans.  But the burden of managing risk continues to be quite the struggle, especially when 96% of Americans do not understand the basic health insurance terms (copay, coinsurance, deductible, and out-of-pocket max).

Sending the entire team off on a voyage into the unknown waters of high-deductibles can seem unhelpful and "not real insurance" to some.  This is why the best way to implement the HDHP strategy is to provide some sort of HSA dollars right out of the gate.  This can be viewed as "seed funding," and helps the employees have something to actually use as they get used to this new style of consumer-driven plan.

But it shouldn't stop there.  As I mentioned before, insurance is about the transfer of risk.  Therefore lowering risk is how to truly make a benefit better.  We're already heading in the right direction using HDHPs to generally lower out-of-pocket max, as well as seeding HSA dollars to spend with it.  But another popular method of improving the plan while not absorbing too much of the actual expenses are backend health reimbursement arrangements (HRAs).  These can be designed to kick in only after certain levels of expenses have already been paid for by the employee, but helps to keep a low net-exposure for the employee.

These two methods certainly have a learning curve.  But if the strategy of the organization is to save money and keep their benefits competitive, using frontend HSA dollars with a backend HRA will help to manage health care dollars better while still ensuring great protection to the team.

3. Health care marketplace 

Other than the top trend of just cancelling group health plans altogether, there was another solution making its way around.  Whether it was due to participation issues or not being able to pay the required 50% of employee-only costs, employers wanted to at least do something for their employees.  The idea was just giving a wage increase to their people and sending them on their way to shop by themselves.

The IRS actually weighed in on this option in Notice 2015-17, and confirmed that as long as the dollars were not contingent on a health plan, the employer could give various amounts to their employees.  This would not itself fulfill the large employer mandate, but due to the savings requirements from some organizations, they would simply anticipate the expense of their employer shared responsibility.

But maybe you're asking why this would ever be a benefit to the employee?  There are actually anywhere from 10 to 60 different reasons.  The first benefit is that the employee would now be eligible for tax credit discounts on individual plans (officially advanced premium tax credits).  Also, many employees then became eligible for spousal plans where there was a "spousal carve-out" because there was now no traditional group health benefit offered.

Additionally, short-term limited duration plans (health underwritten and expire each year but can be renewed if eligibility is maintained) that have grown increasingly popular because of another executive order from the Trump Administration in 2018. And health care sharing organizations have now grown to 1.5 million individuals nationwide in very stable communities of members who help pay for one another's medical bills.

When all of these options are combined, a truly robust offering becomes available to employees when extra pay is given instead of health benefits. That helps employers cut their costs but also take great care of their team.