BY KYLE ESTEP
In the midst of great uncertainty, and arguably because of it, the individual coverage health reimbursement arrangement (ICHRA) is catching on. HRA signups at Take Command Health have grown drastically since ICHRA’s inception, with only a small dip shortly after the pandemic began and an open enrollment season surpassing expectations. Possibly more telling, however, is a renewal rate of 96% for the 2020 “freshman class” as they entered 2021. Employers that make the switch don’t seem to be looking back. With the dust beginning to settle from 2020, it’s time to unpack a year’s worth of data. I’d like to share three key insights from our research, three success stories, and the bipartisan support we believe we’ll continue to see.
WHAT THE DATA TELLS US
Based on our own client research from our 2020 ICHRA report, companies of all sizes are signing up. Small business interest doesn’t come as a surprise, but the number of larger employers with 50 to 500 employees is a critical insight. These clients must offer health insurance coverage per the Affordable Care Act (ACA) employer mandate, but often lack the sophisticated resources to administer a group plan, manage the risk, or negotiate favorable rates. According to our study, the average reimbursement rate for ICHRAs is $750 for singles and $932 for families. Around 60% of employers chose to reimburse for medical expenses and premiums—a more generous choice, and 40% reimbursed premiums only—a more predictable one.
Correlating with a strong individual market, California continues to be a leader in ICHRA adoption. We see similar adoption trends in other states with strong individual markets— notably Minnesota, Massachusetts and Colorado. On the small business side, common industries include professional services, non-profits, religious institutions and tech companies. The momentum in the mid-market space appears more widespread, with service sector industries including hospitality and logistics leading the way.
ICHRA IN ACTION
While our clients represent a broad sweep of industry and location, they are tied together by their common pain points: budget concerns, participation rate worries, the predicament of covering hourly, remote or gig workers, or how to prepare for premium hikes. ICHRA, with its design flexibility and tax advantages, is the right solution for many companies to combat these challenges. Here are three examples.
• A mid-sized company with 90 employees was facing large renewals for their fully insured group plan before they opted for an ICHRA. When designing their HRA, they varied reimbursements by age, benchmarked allowances off of previous group plan offerings, and employee participation remained strong (66%). Once the ICHRA was implemented, the company ended up saving close to $120,000 on benefits over the previous year.
• A fast-growing company with 4,000 employees in 20 states was unhappy with their self-funded plan’s performance. They implemented an ICHRA in some states while keeping the group plan in others. Allowances were adjusted by region to optimize budget and maintain buying power. They saved about $1.5 million in their first year.
• A large hospitality company wasn’t ready to switch to ICHRA from a group plan before the pandemic, citing the tight labor market. With the hospitality industry hit particularly hard with furloughs and layoffs, the company changed course, opting to rebuild their benefits structure around ICHRA once it could bring its employees back to work. With the number of hourly workers and part-time workers who couldn’t participate in the group health plan previously, the defined contribution model just makes more sense.
While President Biden has swiftly reversed many of the executive orders of his predecessor, ICHRA is fulfilling a campaign goal of stabilizing the ACA by infusing new lives into the marketplace.
WHAT COMES NEXT FOR ICHRA
The pandemic and the recession certainly have played a hand in ICHRA adoption, but it’s important to consider the political implications for ICHRA with the agenda of the new administration. Remember, the framework for these new models of HRAs was created during the Obama administration and expanded during the Trump administration via executive order.
While President Biden has swiftly reversed many of the executive orders of his predecessor, ICHRA is fulfilling a campaign goal of stabilizing the ACA by infusing new lives into the marketplace. Seventy percent of our small business clients are new to benefits, meaning healthy individuals are joining the risk pool without subsidies and are covered by quality, ACA-compliant plans. Its bipartisan foundation, its role in bolstering the market, and its track record displayed in a year’s worth of data all point to the same thing: ICHRA is a critical piece of the puzzle for fixing a broken system—and it’s here to stay.
KYLE ESTEP is director of business development for Take Command Health, a SaaS platform that offers an end-to-end ICHRA solution. Prior to Take Command, Kyle led Oscar Health’s growth across the country, starting in Texas. To learn more about Take Command Health’s broker partnership program and end-to-end ICHRA solution,