Some employers are ditching conventional health group plans, and instead offering individual coverage health reimbursement arrangements, or ICHRAs, instead.
Some of the benefits of ICHRAs:
* Helps control costs. Instead of searching for a plan that your employees will be happy with and you can afford, employers can set an annual contribution and adjust it with inflation. Employees shoulder any premium costs above the employer contribution.
* Affordable Care Act-compliant.
* Tax benefits. Employers can deduct their contributions, and employees can pay premiums with pre-tax earnings.
* Better benefits for seasonal or part-time employees.
But this alternative to traditional group health plan coverage isn't appropriate for all employers. Some disadvantages include:
* Administrative challenges. Administering an ICHRA can be complex, and many employers choose to contract with third-party vendors to oversee their health benefits.
* No more ACA premium tax credits. ICHRA-eligible employees may not be eligible for ACA premium tax credits, which are used to reduce premiums on insurance plans purchased through a health insurance exchange.
* Coverage options may be limited. If employees reside in a weaker insurance market, an employee may not have a wide variety of affordable plans to choose from. Additionally, these individual health plans may have higher cost sharing, which leaves employees on the hook for higher out-of-pocket expenses if they have any unexpected medical problems.