With an ever-increasing number of healthcare coverage options for employers to offer, more are turning to a relatively new player in the market: individual coverage health reimbursement arrangements (ICHRAs).
Through ICHRAs, employers provide funding for workers to use to purchase Obamacare plans, instead of offering group health insurance. And the level of that funding is rising, a report by PeopleKeep, a benefits software administration company, found.
The average monthly allowance employers provided from July 1, 2021 and June 30, 2022 was $980.75, which marked an 11% increase from the previous year, per the PeopleKeep report. Meanwhile, the average premium for the lowest-cost, self-only gold Obamacare plan was $462 in 2022, according to the Kaiser Family Foundation. Employees can use ICHRA funding for premiums and other approved medical expenses.
“Companies are seeing the financial and competitive benefits of placing healthcare purchasing power in the hands of their employees, rather than picking a plan, or, at best, a few plans, that don't fit the needs of all of their workers,” Victoria Glickman Hodgkins, CEO of PeopleKeep, said in a news release.
While fewer than 2,500 employers offer ICHRAs, that number has grown nearly 350% since 2020, the year the accounts first became available, according to an October report by the HRA Council, a trade organization. Of those surveyed, 92% offering ICHRAs had 20 employees or fewer.
Among those signing on in the past couple years are what are known as applicable large employers (ALEs) under the Affordable Care Act’s employer mandate. In the past year, 93% of ALEs used ICHRAs as their sole benefit, up 8% from the year before, PeopleKeep found.
As health benefits costs continue to rise in the U.S. and globally, some employers are turning to options like ICHRAs to control costs. In North America, rates are expected to increase 6.4% in 2023, according to a survey of medical insurers by advisory firm WTW released Oct. 13.
