Companies today have many options for offering their employees health benefits. While traditional group plans used to be the only way to do so, that is no longer the case.

Alternative plans such as Individual Coverage Health Reimbursement Arrangements (ICHRAs) and Qualified Small Employer Health Reimbursement Arrangements (QSEHRAs) provide employers with new ways to provide health benefits to their employees in a more flexible and potentially cost-effective way.

In this article, we’ll provide a general overview of ICHRA vs QSEHRA vs traditional group health plans so you can decide which plan would work best for your company.

Traditional Group Plans

Traditional group plans were the standard for the industry for many years. They offer an all-in-one package that employers can offer their employees that might include medical, mental health, vision and/or dental coverage.

From an administrative standpoint, traditional group plans provide the simplest path forward for employers. Typically offered through benefits brokers, these plans can be customized to the company’s needs but often provide only a few plan options.

Employees pay a premium to receive coverage under the group plan, which is usually deducted directly from their paycheck on a pre-tax basis. Many employers will also contribute to these premiums to reduce the costs for their employees.

While traditional group plans are easy to understand and do provide comprehensive coverage, they also don’t provide a lot of flexibility. For instance, individual employees have to pick from only a few general plans and usually can’t customize their plan to their specific liking.

Participants in the plan are also limited in the available provider network, meaning they may have to switch current health providers if they aren’t on the list.

Still, traditional group plans are great for any employer that wants comprehensive coverage that’s easily managed by an outside entity.

ICHRA

ICHRAs provide employers and employees alike with more choice when it comes to their health coverage. Instead of providing employees with insurance plans, companies offer employees reimbursement amounts that help offset the costs of premiums and other out-of-pocket expenses.

Employees are responsible for obtaining health insurance on their own, and they can use the reimbursement amount from their employees to lower their costs. The IRS doesn’t set any contribution limits from an employer’s perspective, though the plans must meet the affordability guidelines of the Affordable Care Act (ACA) for all large employers.

ICHRAs are great for companies that wish to offer flexibility. These plans empower employees with a high level of choice so they can select a health insurance plan that’s best for them based on their coverage needs and provider network.

With these plans, employers can also set employee classes based on things such as full-time and part-time workers, and then set different reimbursement amounts for each class. This is a great recruitment tool, since many part-time and seasonal workers usually don’t qualify for employer-sponsored health coverage.

The potential downsides to ICHRAs are that they are more complicated to create and manage. There is also a heavy compliance onus that falls onto the employer with these plans.

QSEHRA

QSEHRAs are health plans that small businesses are able to offer. To qualify, companies must have less than 50 full-time employees.

These plans operate similarly to ICHRAs, in that employers set reimbursement amounts that employees can then use to offset their premiums and other qualified out-of-pocket expenses. Just like ICHRAs, these reimbursements are also done tax-free, which is another big benefit for employees and employers alike.

Unlike ICHRAs, QSEHRA plans have stricter requirements from the IRS. This includes not just the size of the company but also the contribution limits.

In most cases, companies can only offer uniform contribution limits across all employee classes, which provides less flexibility than ICHRAs in this regard.

That being said, QSEHRAs still offer employees a high level of choice when it comes to selecting their own health insurance coverage. Plus, these plans are simpler to create and manage than ICHRAs, with the reporting burdens not being as stringent.

Beckham Ellis Insurance Group Can Help You Select the Right Benefits Plan

Companies today have many choices when it comes to offering their employees health insurance coverage. But, whether ICHRAs, QSEHRAs or traditional group plans are right for you depends on a number of different factors.

When you partner with Beckham Ellis Insurance Group, you can rest assured knowing you have benefits experts on your side who can help you determine which type of plan is best for your wants and needs, and that of your employee base.