As a benefits consultant, you present your clients with the best—and latest—HR solutions based on their needs. So when a new personalized benefits tool comes down the pipeline, you want to know about it. Well good news. That’s why we’re here. To tell you all about new tax-advantaged Individual Coverage Health Reimbursement Arrangement that will hit shelves January 2020. Your clients will thank you.
What does ICHRA do exactly?
Let’s start by introducing what ICHRA is, for those that are new to the discussion. An ICHRA (pronounced Ick-Rah) or an Individual Coverage Health Reimbursement Arrangement, is a new tax advantaged health reimbursement account tool. So new, in fact, that it won’t be available until January 2020. But that doesn’t mean you shouldn’t start thinking ahead for your clients. Q3 will be the time to start making decisions.
So what does it do exactly?
A company of any size can offer a monthly amount (with no minimum or maximum) to reimburse for premiums and medical expenses, and employees can choose the best plan that fits their needs.
So, without further ado, here are the 5 things a benefits consultant should know about ICHRA.
- Tax Efficiency: ICHRA is the “Hulk” version of its predecessor, the QSEHRA. It extends the tax-free benefits to a larger pool of employers with more flexibility for scaling those benefits across an increased number of ICHRA employee classes. ICHRA allows employers to make reimbursements for many healthcare costs without having to pay payroll taxes AND employees don’t have to recognize the reimbursements as income tax. Wait, there’s more, the reimbursements actually count as a tax deduction!
- Affordability: Raise your hand if you have noticed an increase in group plan rates for your clients, every year, for the same or less coverage and no chance of catching a break? You aren't alone. Enter ICHRA. ICHRA is changing how group benefits are allocated and may get rid of our need for them altogether. With ICHRA there are no minimum or maximum monthly reimbursement limits, employers can set the dollar amount of their contributions, personally identify which benefits for each class of employee, and will have some peace of mind since there are no price increases unless the employer would like to increase their contribution. Sounds amazing, right?
- Size Requirements: A company doesn’t have to be the size of North America to get in on this pretty cool deal. Whether they have 20 employees or 20,000 employees, ICHRA will work for you as long as employees have an individual marketplace plan (so no faith-based plans like Medi-share or TRICARE for the time being).
- Flexibility: Timing-wise, ICHRA can be offered anytime throughout the year. Employers can choose to open the plan to their employees, triggering a special enrollment, when they would like. There's also great flexibility in terms of controlling your healthcare spend and targeting your dollars at your most important employees. You could offer your full-time staff a traditional group plan, remote employees an ICHRA with $500 a month, and part-time workers a smaller monthly reimbursement allowance. You can even vary rates by location, which makes sense since some markets are infinitely more expensive than others.
- Transfer of risk: HRAs allow employers to get out of the insurance “risk” game. For any employer that is over 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 describes your client, 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.
We think HRAs are the way of the future, similar to the shift from pensions to 401Ks, which is we're working hard to create the best 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 employers need to consider them prior to open enrollment to get their ducks in a row.
If you want to learn more, chat with our team on the website, check out our new ICHRA Guide, or our CEO’s recent blog on the new rules, or a press release on our White House visit, or watch the President’s remarks on the matter.
We will keep this page updated as more information comes in. Stay tuned!