With the cost of health insurance rising almost on an annual basis, businesses are looking for new and creative ways to save money while crafting benefits plans that they’re current and prospective employees want.

As one of the main recruitment and retention tools, businesses that are looking for alternatives to traditional health plans need to consider the quality of the plans they’re offering.

In the last few years, individual coverage health reimbursement arrangements, or ICHRAs, have become very popular ways for businesses to provide health insurance to their employees while saving on their bottom line at the same time.

If you’re new to ICHRAs, you may not understand how they differ from traditional group health plans. Below, we’ll outline what an ICHRA plan is and what advantages it could offer your business.

What is an ICHRA?

An ICHRA is a health benefit that was first created in 2020. The IRS approved this health plan, which employers fund just like they do traditional

It does work differently than a traditional group health plan, though. Instead of the employer making contributions to the health plan and then employees paying a monthly premium, employers will reimburse their employees for qualifying medical expenses and their individual premiums, and these reimbursements are tax-free.

With an ICHRA, employees will purchase health insurance on their own and pay for medical costs out of their pocket. They’ll then submit these expenses as proof, and get eligible expenses approved, up to a certain amount.

What are Some of the Advantages of ICHRAs?

There are numerous advantages that ICHRAs provide to employers (and employees) over traditional group health plans.

Flexibility is the main advantage, and it comes in a few different forms.

First, there aren’t any maximum or minimum contribution limits for ICHRAs. This allows employers to choose allowance amounts that fit their budget and also support their employees best.

ICHRAs will satisfy the affordability portion of the Affordable Care Act’s employer mandate, which is a very important aspect of them. Unlike group health plans, there also isn’t a minimum participation requirement for ICHRAs, which provides further flexibility.

There’s also significant flexibility that employees can gain from ICHRAs. They can choose whatever health insurance plan works best for them and their family, while taking advantage of the reimbursement allowance — allowing them to potentially save significant money off their premiums and out-of-pocket costs.

Employees just need to make sure that the insurance coverage they choose meets the ACA’s minimum essential coverage, or MEC, mandate in order to participate in the ICHRA and take advantage of the reimbursements.

How Can ICHRAs Help with Recruitment and Retention?

Benefits packages are one of the main tools that companies use today to attract and retain talented employees. ICHRAs are a great way to boost both of these efforts.

A unique aspect of ICHRAs is that you can offer different benefits to different employee classes. There are 11 different employee classes you can segment your workforce into, and you can offer a different allowance amount for each class.

A common way that employers use this to their advantage is by separating full-time employees from part-time employees. Through an ICHRA, they can actually offer all of their employees a health insurance benefit, while offering their full-time workers a larger reimbursement allowance than their part-time workers.

This can be a great recruitment tool for companies that use a lot of part-time and/or seasonal workers. These classes of workers typically don’t qualify to participate in traditional group health plans, but would receive a significant benefit with an ICHRA.

What Other Benefits Do ICHRAs Provide?

Traditional group health plans are tied to employment at a specific job. In other words, they are only applicable while an employee is working for a particular company.

When they leave that job — for whatever reason — they often lose health coverage. This can be quite a burden for people, even if they’re able to obtain new health coverage in a new job.

ICHRAs, by contrast, are portable.

Since employees obtain their health insurance coverage on their own, the plan doesn’t expire when their time with the job ends. While the plans may become more expensive when they leave a job — since they wouldn’t get the same reimbursement amount — they could still retain their actual health coverage, which could be very important.

Consider whether an ICHRA is Right for You with Beckham Ellis Insurance Group

ICHRAs are becoming a very popular tool for employers to offer good health insurance to their employees while saving money as well. They provide great flexibility and potential cost savings to both employers and employees alike, and can be an excellent option for some businesses.

If you’re new to ICHRA and are wondering whether it would be right for your business, partner with Beckham Ellis Insurance Group. We can help you understand what an ICHRA is and whether these plans would provide advantages to you and your workforce over a traditional group health plan.

If you’re located in the South Carolina or Georgia region, please contact us today to learn more.