Individual coverage health reimbursement arrangements (ICHRAs), a new employer-sponsored health-care benefit program for active employees that became available this year, are drawing the attention of U.S. employers.
This is according to research by Willis Towers Watson, which revealed growing interest in this new benefit as a way for employers to keep their costs fixed by giving employees the opportunity to manage their own health care benefit choices and spend.
An IRS rule issued in 2019 opened the door for employers to begin offering ICHRAs this year. With an ICHRA, employees choose where their medical benefit dollars are spent by purchasing individual insurance coverage and then receiving a reimbursement through an employer-sponsored health reimbursement arrangement.
According to the Willis Towers Watson “2020 Health Care Delivery Survey,” about one in six employers (15%) is planning to offer or considering offering ICHRAs to at least some portion of its employees in 2022 or later. The survey results showed similar levels of interest regardless of employer size, with 20% of large employers planning to offer or considering offering ICHRAs to at least some portion of their active employees. In a further sign of support for ICHRAs, a forthcoming Willis Towers Watson survey of chief financial officers found one-third are considering ICHRAs for some portion of their active employees.
“Not surprisingly, relatively few employers adopted ICHRAs this year, as the pandemic diverted much of their attention to other critical benefit matters,” said John Barkett, senior director of policy affairs, benefits delivery and administration, Willis Towers Watson. “However, we expect to see interest grow as companies learn more about ICHRAs and the market for individual health plans continues to grow more robust each year. ICHRAs may be a preferred option for companies considering offering health care benefits through a defined contribution approach personalized to each employee.”
The survey found nearly one in three (29%) public sector and education employers and almost a quarter (22%) of wholesale and retail employers are planning to offer or considering offering ICHRAs in 2022 or later. These sectors may be among the early adopters of this new benefit option, which affords employers greater ability to control costs and provides employees with more health benefit options than their employers offer today.
“ICHRAs may align well with employers rethinking their overall approach to benefits, especially in certain industries that have struggled with the challenge of providing competitive benefits that meet the diverse needs of their workforces under ever-increasing budget pressures,” Barkett said. “And as more employers adopt the ICHRA approach, employees could find relief from the burden of having to change plans whenever they change jobs.”