You've probably heard a thing or two about the new HRAs coming our way in January 2020. So will this new tax-advantaged tool work for your company or your client's company? Read on to learn more about the benefits of ICHRA and what it can do for you.
It goes without saying that benefits are the number one way of attracting and maintaining talent, no matter what industry you find yourself in.
Benefits are a non-negotiable. But how can we ensure that the benefits we are offering are the most efficient and tax-advantaged?
Good news. There's an HRA for that. Individual Coverage HRAs help our healthcare dollars stretch further, bringing a great degree of flexibility with them.
The most exciting thing, in our opinion, is that the new HRAs that have emerged from recent regulatory updates are a rare bipartisan win for the American worker - not just the employer.
What is an ICHRA anyway?
The basic idea is that prior to the changes in the rules surrounding HRAs, businesses have been offering pricy, one-size-fits-all group health insurance plans that creep up in price year over year. For many business owners, there’s the added burden of having to choose and administer a plan for employees and handle all the paperwork. For their employees, they might be stuck in a plan that doesn’t really suit them without any other options.
Enter ICHRA: the smarter way to offer benefits. Employers just choose a budget that works for them, their employees go and sign up for a plan of their choosing, then they get reimbursed for the costs. The best part? It's tax-free.
What’s so great about ICHRAs?
Eliminates risk: HRAs allow employers to get out of the insurance “risk” game. For any employer with 50+ employees, whether they are currently self-insured or fully-insured, they are effectively responsible for their employees’ healthcare spend. Some employers are figuring out how to manage costs effectively: they are invested in wellness programs, engaged in high-performance network design, and interested in helping employees with chronic conditions effectively manage costs. Other employers would rather not try to manage employee healthcare spend. If that’s you, an ICHRA is the way to go. You can still offer generous benefits (or not generous, up to you) and your costs are fixed because you have no risk to manage.
No contribution limits: The good news for the new HRAs coming in January is that instead of limiting participation to companies with less than 50 employees with a set contribution limit ($5150 for individuals / $10,450 for families) like a QSEHRA or keeping up with participation requirements like a group plan, it can be any sized company with no minimum or max contributions at whatever monthly cost you want.
No size restrictions: Any business of any size can participate. ICHRA is an HRA solution for small business AND mid-size to large companies.
Custom design for efficiency: Employers can vary monthly reimbursement amounts to different classes of employees. These 11 employee classes separate employees into groups by job-based criteria such as hours worked, geographic location, salary v. hourly, age and filing class. This is particularly helpful for companies wanting to offer a reimbursement to all employees but want to make a distinction between salaried management and hourly and/or part-time.
What comes next
We think HRAs are the way of the future, similar to the shift from pensions to 401Ks. That's why we've been hard at work creating the first Individual Coverage HRA tools on the market.
With a bipartisan history and no loud opposition to the new regulatory changes, we are confident in the longevity of HRAs. The White House estimates about 800,000 companies will opt for these new HRAs over the next 5 years and will benefit around 11 million employees. We think it will be even more.
Timing-wise, the new HRAs are going to be available January 2020, which means that I you or your client are considering an HRA, now is the time to get all of your questions answered, ahead of open enrollment.
If you want to learn more, check out our ICHRA guide, our first of its kind ICHRA affordability calculator, our innovative and easy to use ICHRA administration platform, or our CEO’s recent blog on the new rules, or a press release on our White House visit.