Why ICHRA plans weaken competitiveness in historic job market

One of former President Donald Trump’s ostensibly business-friendly health care policies may be setting businesses up to fail. The last administration sought to give businesses a new way to provide health benefits, but their approach has turned out to be bad for employees and bad for businesses trying to remain competitive in the current labor market. 

When the Trump administration announced the creation of individual coverage health reimbursement Arrangements (ICHRAs) in 2019, they were framed as policies that “provide funding that reimburses employees for their own purchase of individual health coverage that best fits their health care needs.” But in reality, ICHRAs mean employees lose the employer-sponsored coverage they’re accustomed to and have to fend for themselves to find substandard coverage with a fixed stipend that often doesn’t go as far. Businesses also benefit from increased employee wellness and productivity when their workers have adequate coverage from their employer-sponsored plans – a 13.5% increase in employee wellbeing reduces medical costs by 5.2% per employee per year.  

ICHRAs leave workers with higher monthly health costs and the risk of inadequate coverage. A study from Avalere Health found that not only do ICHRA plans result in fewer available providers, they come with significantly higher deductibles when compared to employer-provided insurance plans. Upwards of 70% of those on ICHRA plans find themselves stuck under more restrictive provider networks, and on average, employees on ICHRA plans are paying triple the deductibles of those with employer-provided plans. Also in the fine print, workers find that being offered an ICHRA excludes them from premium tax credits provided by the Affordable Care Act.