ICHRAs Offer a New Landscape for Small Business Employee Health Benefits
In mid-June 2019, the US Departments of Health & Human Services and the Treasury issued a rule allowing employers to contribute pre-tax dollars for employee health care coverage through a new health reimbursement arrangement named ICHRA. Like previous HRAs, employees can use employer funds to purchase health coverage from the public exchange or other insurance plans. However, this ruling lifted many restrictions on how companies could use HRAs or even qualify for group health plans, such as employee participation rates and affordability. This news changes the game for small business employee health benefits.
The flexibility and options offered by this new ruling are not well known, but Wharton & Power Insurance has already assisted many local employers in taking advantage of this opportunity. For example, we helped three small business clients offer ICHRAs to their employees: a remodeler with 12 employees, a homebuilder with 12 employees and a restaurant with 70 employees.
Benefits of ICHRAs in Offering Small Businesses Employee Health Benefit
1) Flexibility in Coverage
By allowing employers to provide funds for employees to choose their own coverage, ICHRAs provide the flexibility for employees to determine their budget and coverage, rather than the employer.
2) Fewer Restrictions
Small businesses had a difficult time meeting the requirements for group health plans, such as the number of W-2 employees, participation rate and premium contribution levels. ICHRA removes those restrictions while placing more control in the hands of the employer and the employees.
3) Wider Employee Definitions
ICHRA allows contractors, 1099, W-2, seasonal and temporary employees to participate, though they must be of similar employment class, such as hourly or salary. Employers may vary their contribution levels per employee.
4) No Set Contribution and Participation Levels
The employer sets the amount of money they want to provide to employees to supplement health care premiums. And, not every employee has to participate, making no real downside to the employer to offer the program.
How ICHRAs Work
Once a budget has been set and the paperwork has been filed, an insurance broker like our Wharton & Power Insurance Team will work with employees to choose a health insurance plan that works for them. Considerations include the amount of money coming from their employer, their personal budget for health insurance premiums and the coverage they need. W&P then explores the options offered through the public exchange and private insurers. We also test for federal subsidy opportunities which can further reduce the employee’s cost of coverage. Rather than a company-wide group meeting about coverage options, the employee experience is more personal and has the potential to provide more beneficial coverage. With W&P, there is no cost for this service.
Partnering this program with Wharton & Power Insurance can make taking advantage of this new option easy for your business. We have been working with employers and employees on both group and individual policies for over 30 years. We can help guide you through your budgeting decisions, set up your program and then work with your employees to choose their best plan option. If you are interested in exploring this program for your business, we’d be happy to help. Changing your current group health benefit plan serves as a qualifying event, so we can write the plan at any point in the year. If you do not have a plan, we can start getting ready for open enrollment. Even if you have tried something like this before, the new ruling has changed the landscape – it’s time to take another look. Send us an email, or give us a call at (317) 663-4138.
