Employer Uses of an ICHRA

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Employer Considerations

Employer Uses of an ICHRA

Prevailing wisdom is that ICHRAs will be most attractive to small employers. ICHRAs create an opportunity for small employers to provide a tax advantaged health benefit without some of the more difficult administrative aspects of offering group health benefits. However, some ICHRA characteristics will also appeal to large employers.

Examples of Employer ICHRA Strategies:

Employers Having Trouble Meeting Participation Requirements

Group health plans typically have minimum participation requirements. Some employers, especially those with many low wage workers, struggle to meet those requirements. Employers can offer an ICHRA regardless of participation.

Employers with High Turnover or Many Variable Hour Employees

Employers with a very fluid workforce have a more difficult time administering benefits under a traditional group health plan. An ICHRA offer could ease some of that administrative burden for this type of employer.

Employers Who Want to Offer Something to Part-Time Employees

Very few employers offer access to group health plans to part-time workers. An ICHRA could be attractive to some employers wishing to offer at least some limited benefits to part-time employees.

Applicable Large Employers Offering Only Minimum Essential Coverage (MEC)

To eliminate the risk of the §4980H(a) penalty some employers have implemented a strategy of offering only a “skinny plan” MEC to a subset of their employees. An ICHRA offer, with a low employer contribution, could be an alternative strategy for these employers.

Employers with High Health Plan Rates due to Claims Experience

Employers who have higher than average claims costs could benefit from moving employees to individual health plans, which are all community rated.

Employers with a diverse workforce or spread out geographically

Employers with a diverse workforce, or with employees spread out across the country, may struggle to put group health plan coverage in place to meet various cost and coverage needs. An ICHRA could provide a similar level of employer contribution while allowing employees to choose coverage better matching their particular needs.

Employers with a significant number of Medicare eligible employees in A certain class

While the ICHRA cannot be offered to just Medicare-eligible employees, if an employer has a significant number of employees who are Medicare-eligible, an ICHRA may be a more attractive option for a particular class of employees.