Individual Coverage Health Reimbursement Arrangements
New rule expands health insurance opportunities and choice for American businesses and workers
For years, small businesses have struggled with the expense, complexity and restrictions of offering health insurance to their employees. A new rule that was signed into law June 13, 2019 gives businesses of all sizes the opportunity to offer simpler, more affordable health insurance to more employees than ever before.
The new rule, called an Individual Coverage Health Reimbursement Arrangement (ICHRA), allows businesses to fund an account for each employee who can then shop on the individual marketplace to buy a health plan that works best for them The rule goes into effect for health plans starting January 1, 2020.
Why is this new rule groundbreaking for both companies and workers? Mainly, it launches big opportunities for small-mid size businesses, more choice for workers, and a more robust health insurance marketplace.
In the current tight labor market, many companies are looking for a competitive edge to attract and retain workers. Health insurance tops the list of attractive benefits that employees seek out. Typically, small businesses do not have the expertise to navigate group health insurance administration and bear the costs. Current insurance rules restrict health insurance offerings for part-time and seasonal employees, leaving industries like food service, hospitality and retail out in the cold.
The new ICHRA rule incentives those businesses standing on the sidelines to start offering health insurance. And those already offering health benefits can simplify their offerings and administrative burden. Employers can contribute as much money as they want to their workers’ accounts, and even offer the ICHRA to part-time and seasonal workers. All while receiving the financial advantages of paying with pre-tax dollars.
Additionally, employees reap the benefit of increased choice, as they can select from health plans offered on the individual health insurance marketplace—a much better option than the one or two plans included in traditional small group benefits. Currently more than 80% of small-mid size businesses offering health benefits only give their employees one plan option. What business owner or HR manager wants the responsibility of picking that one health plan that is supposed to appeal to everyone but falls short for many? (Kaiser Family Foundation Employer Health Benefits Survey, 2018, Figure 4.1)
Lastly, more people buying individual insurance should strengthen the ACA marketplace and lower premiums for everyone down the road. The Departments of Treasury, Labor, Health and Human Services predict that within 10 years, about 800,000 employers will offer ICHRAs covering more than 11 million employees and their families. More buyers in the marketplace may also entice insurers to enter additional markets, increasing competition and choice for shoppers everywhere.
In conclusion, the ICHRA rule is a winning solution to expand health insurance access for more Americans. Additional businesses will find it easier and financially beneficial to offer health insurance to employees. Workers will have actual choice to select the health plan that fits them best. And the individual health insurance marketplace will grow, which ultimately creates a more robust marketplace to cover more Americans.