In the ever-evolving landscape of employee benefits, a new trend is emerging: employers are increasingly opting to provide workers with an allowance to purchase their own health coverage. This shift allows for greater personalization and control over healthcare spending, while potentially offsetting the rising costs of traditional group plans. This article explores the potential benefits and challenges of this innovative approach, including its impact on individual consumers and the broader insurance market. Health insurance in the United States and Affordable Care Act are relevant topics for further context.
Customized Health Plans for Employees
With the cost of healthcare continuing to rise, employers are under pressure to provide benefits that help their employees while also providing protection to their bottom line. For example, one approach is the Individual Coverage Health Reimbursement Arrangement (ICHRA), a solution that enables companies to provide employees with a fixed monthly allowance to buy their own health insurance on the individual market.
This method could provide a number of benefits for both employers and employees. Employers can gain more control over their health care spending but still provide a benefit by breaking out of the traditional group plan model. Meanwhile, employees get the flexibility to choose a plan that better fits their individual health needs and budget, opening the door for more targeted coverage. As Dave Lantz, an employee at Lycoming College, said, “It’s good to have the option of working that high deductible versus higher premium. It used to be really hard to plan for that deductible.
The Switch — Challenges and Exceptions
Although the ICHRA model is a compelling possibility for an employer, transitioning to such a model might be quite complicated and necessitate extensive planning. It’s also difficult to manage dozens of different insurers and benefits before helping employees choose the right coverage, which could call for giving workers a stipend in lieu of providing coverage.
Its complexity has led some employers to opt out — especially the smaller ones, according to Tim Hebert, managing partner at Sage Benefit Advisors. “Employees are all over the place in different plans and they don’t feel like they’re being taken care of,” he adds. But a new breed of vendors have come on the scene to help employers and their workers navigate ICHRA implementation more smoothly — and with a better employee experience.
Human Market and policy implications
ICHRAs grow in popularity, questions rise regarding its affect on individual insurance market. Insurers might try to sell short-term plans — as some have suggested here in Atlanta — to employers with a sicker workforce, and this could open up a new type of divide akin to the differences between individual market plans (with typically narrower networks and higher deductibles) and more traditional employer-sponsored coverage.
Workers, especially those with lower salaries, may be better off financially by getting premium tax credits and cost-sharing reductions through marketplace plans under the Affordable Care Act. But receiving the ICHRA benefit would disqualify them from getting these subsidies. The most significant effect is that you will not be eligible for marketplace subsides, says Matthew Fiedler, a senior fellow at the Brookings Institution.
