The cost of doing business continues to rise and opportunities to reduce expenses are a rarity. Businesses today face a unique challenge, cutting costs while retaining the top-tier talent needed to excel in today’s market. Regardless of the industry employee health insurance has become an indispensable benefit offering for any business that wants stability, growth and to lower employee turnover. However, materials, freight, labor, and insurance costs continue to rise along with interest rates. That being the case, businesses are looking for financial relief and opportunities to take advantage of ways to save capital. That is exactly what the Individual Coverage Health Reimbursement Account or I.C.H.R.A. provides for companies of all sizes.
What is an I.C.H.R.A.?
The I.C.H.R.A. or Individual Coverage Health Reimbursement Account was introduced in January of 2020 as a legal, viable, ACA compliant alternative to group health insurance. The main crux of the solution is that it allows businesses to reimburse their employees for their individual health insurance plans as an affordable alternative to offering a group plan.
Why is an I.C.H.R.A. Good for Businesses?
The I.C.H.R.A. plan offers flexibility and helps maintain better controls on costs. Most individual plans that are comparable to group plans cost less on the individual market. The individual market has become more specialized in the benefits each plan provides. This allows major carriers to keep costs down by offering plans more customized benefits that appeal to people with different needs and pre-existing conditions. Group plans, outside of the Bronze level, tend to be loaded with benefits. Which makes the plans appealing to employees because they provide better coverage across the board. Individual plans do not have PPO’s they have EPO’s and HMO’s which are less expensive network, granted they offer fewer health care provider options.
However, they are more expensive and for employers that cover all or most of the cost of a group health plan, the affordability factor of the I.C.H.R.A. is attractive. It also takes the pressure off the shoulders of management in selecting plan options that cater to all employees. There won’t be issues with employees being unsatisfied with the health insurance plan choices offered because they will be free to choose any individual health insurance plan that is available to them in any given state, whether your state is a healthcare.gov state or is one of the eighteen states that has a health insurance exchange. There is also no C.O.B.R.A. administration involved. These are individual plans, so when employees leave the company they can keep their health insurance, provided they continue to pay their monthly premiums.
Additional Advantages for Small Businesses
There are additional advantages for small businesses. The I.C.H.R.A. plan offers flexibility, it allows the creation of employee “classes” based on location, full-time and part-time parameters. This allows the employer to set a budget for each class which helps maintain better cost controls. Small businesses, defined as fewer than 50 employees, also do not have minimum participation requirements. Most major carrier plans require 70% participation. Also, small businesses can re-imburse any amount they want, there is no 50% minimum contribution like there is with a group plan. This allows small businesses to enjoy more financial stability and flexibility.
Why is an I.C.H.R.A. good for employees?
Any portion of the employees contribution can be paid directly from the employee’s paycheck with pre-tax dollars just like a standard group health insurance plan. This feature extends to any dependents or spouses included in the coverage.
The employee can choose a plan that has the medical facilities and doctors they want in that plan’s network. They can also choose the plan that fits their specific needs and budget. This is especially valuable if the employer re-imbursement amount is lower. A group plan will typically only offer a few plan options. Individual plans, in most areas, offer dozens of plan options, many times over a hundred in major metro markets. This allows the employee the option to choose any plan they want from the Bronze, Silver or Gold tiers.
One employee may be younger and interested in a catastrophic only plan, another may be more inclined to choose a gold level plan with a low deductible and low co-pays for doctor visits. Another may choose an individual plan with special benefits like acupuncture co-pays or mental health benefits. Another might want a zero deductible plan while another wants outpatient addiction counseling. The number of plan choices an I.C.H.R.A. offers is unequaled. The employee simply pays the difference for more expensive plans.
Managing an I.C.H.R.A.
Finding the right I.C.H.R.A. provider is key. So, finding an employee benefits agency that knows who offers the best solutions is vital.
The top I.C.H.R.A. providers offer online portal software that is intuitive and makes the employer application process simple with easy-to-follow navigation that can make the initial account set up take less than ten minutes. The software is HIPPA Compliant and includes the IRS reporting requirements, which makes administration easy.
The employees can compare and select their plans on the portal and the reimbursement process is simple. The employee simply clicks a button once they have paid their monthly premium and the software notifies the appropriate company officer, who can reimburse them for the correct amount with a click.
They also provide a responsive, in-house support team to help owners in every aspect including employee enrollment and individual plan questions.
The Big Take Away
Individual Coverage H.R.A.’s empower employees with freedom of choice and employers with a way to lower overhead costs; while still offering a benefits package that allows them to attract and retain the top-tier talent needed to compete in business. Satisfied employees that feel secure also work harder, are more content and stay with companies longer than their counterparts that don’t have employee benefits.
Since many states have their own health insurance exchanges, make sure you find an employee benefits broker in your state that knows the individual plan market, so they can effectively answer your questions. For Colorado based businesses that would like to talk about how an I.C.H.R.A. can save your business money, make sure you speak with a small business health insurance Colorado specialist.