5 questions to ask if you are offered “ICHRA” for health insurance at work
By Whitney Stidom, vice president of consumer enablement at eHealth
Most working-age Americans have health insurance through their employer, with about 165 million people enrolled in this type of coverage. But for a growing number of employees, the traditional group insurance model is going the way of the dinosaur.
Just as we saw a transition away from employer pension plans to 401(k) plans for retirement, we’re starting to see a comparable shift in the way health benefits work. Introduced during the first Trump administration, Individual Coverage Health Reimbursement Arrangements (ICHRA) are growing in popularity, with the number of employees with this type of coverage increasing 50% over the last year.
Tip: For help evaluating if ICHRA is right for your organization, click here to request a free quote and learn how Iris™ from eHealth can cap costs, simplify employee health insurance and save your company 17% or more on health insurance costs.
As tens of millions of Americans make health benefit decisions during the fall’s open enrollment season, what do people need to know if they are offered ICHRA? Here are five key questions to ask:
1. What is an ICHRA?
As an alternative to the group health insurance model, ICHRA (pronounced “ick-ra”) allows companies to make tax-preferred contributions toward the premiums of health plans employees select for themselves and their families in the open market. Like the 401(k), ICHRA moves employers from providing defined benefits to defined contributions. It also enables employees to select from a range of insurance carriers and individual and family plans — rather than the one to three group plans options commonly offered by employers.
2. How do I pick a plan?
To use an ICHRA, you must enroll in a qualifying individual health insurance plan, typically either through the Affordable Care Act (ACA) Marketplace, a private exchange or directly from an insurer. Plans must meet federal minimum coverage standards to be eligible, and short-term plans and sharing ministries don’t qualify. Employers will often select an ICHRA administrator — typically a licensed health insurance agency or broker — which will assist employees with enrollment and on-going support. In most cases, you’ll be able to select from among a dozen or more ACA-compliant individual and family health insurance plans, with the insurance broker helping compare the options based on individual needs and preferences.
3. How do the premium contributions work?
This can vary depending on the employer, with many companies contributing a flat amount per month per employee and in some cases toward coverage for dependents too. The contributions will not count as additional income for tax purposes, if properly set up, and will typically be made through your normal payroll system. As with group health insurance coverage, you’ll typically need to also make contributions toward your total monthly health insurance premiums. Depending on how your ICHRA plan has been set up by your employer, these contributions may also be tax-free and deducted from your paycheck in the same way as traditional employer group plans.
4. Can I still qualify for ACA subsidies?
With ICHRA, you’ll be enrolling in an ACA insurance plan. There is an important difference, however. Based on income, people who enroll in ACA plans are typically able to apply for government subsidies to reduce what they pay toward their monthly premium. This is not the case with ICHRA. With ICHRA, your employer’s contributions toward your total monthly premiums are effectively taking the place of government subsidies that you might have been eligible for.
5. What happens to my plan if I change jobs?
One frustrating part of employer-sponsored insurance is that when you change jobs, you typically lose your coverage. With ICHRA, when you change jobs, you can take your coverage with you. You will no longer receive monthly premium contributions from your former employer, of course, but you may be able to apply for ACA subsidies, if eligible, or you might receive ICHRA subsidies from a new employer offering ICHRA.
If you find yourself offered an ICHRA at work, it is important to understand how the model works to make sure you make the most informed decisions possible. If necessary, it is a good idea to talk with your employer or your employer’s ICHRA administrator for help.