Dive Brief:
- Many employers are considering funding health insurance through Individual Coverage Health Reimbursement Arrangements, or ICHRAs, but they face barriers to adoption, according to a survey published Tuesday by the Employee Benefit Research Institute and Morgan Health.
- More than one-third of employers said they were actively planning or evaluating an ICHRA, which allows companies to reimburse workers for buying their own health plans on the Affordable Care Act marketplaces. But only 11% said they were currently working on implementation, suggesting employers aren’t yet ready to make an immediate change, according to the report.
- Hesitancy to adopt ICHRAs was driven by employers’ worries about the individual marketplace, including affordability concerns. Around 85% of large companies and 80% of small employers said they were at least somewhat concerned that individual market premiums might be too expensive for their workers.
Dive Insight:
ICHRAs have grown significantly after being created during the first Trump administration six years ago. The arrangements, which let employers contribute a fixed amount of money towards their workers’ medical expenses in lieu of a group health plan, could be a good option for employers managing rising healthcare spending, benefits experts say.
Employers most frequently cited flexibility in benefit design, increased employee choice and affordability for companies as reasons to consider ICHRAs, according to the new analysis, which surveyed nearly 1,000 benefits decisionmakers.
Many companies said they’re mulling a possible switch — particularly employers with more than 100 workers. Thirty-six percent of large employers said they were very likely to adopt the arrangements in the next two years, compared with just 23% of small employers that offer a health plan.
Larger employers more likely to consider ICHRAs
Still, interest in ICHRAs hasn’t yet translated into widespread adoption. Employers worry about worker satisfaction and turmoil on the ACA exchanges, according to the survey. More generous financial assistance for ACA health plans lapsed at the end of last year, increasing premiums for beneficiaries and pushing some to drop coverage or enroll in cheaper coverage.
Employers are concerned that the marketplace may be too pricey for their workers. More than 80% of large employers and small companies with a health plan said they were at least somewhat worried that individual market out-of-pocket costs could be too high for some employees.
Additionally, nearly 80% of large companies and almost 70% of small firms reported they were worried about limited plan availability or insurer participation in their area if they were to adopt ICHRAs.
Employers worry about individual marketplace affordability
The survey found other reasons employers might decline to adopt an ICHRA. Forty-three percent of large businesses said their workers preferred a group health plan, and nearly half of small companies that offered coverage reported the same.
Employers also cited a lack of familiarity with ICHRAs and worries about administrative, legal or compliance work associated with the arrangements.
Still, there are factors and policy changes that could motivate employers to use ICHRAs, according to the survey.
Nearly 90% said they would be more likely to choose the arrangements if they could guarantee the same network quality and choice as a group health plan. About three-quarters reported they’d be more likely to adopt ICHRAs if their broker, benefits consultant or peer business recommended the arrangements.
