Growing business interest in a new type of health-care arrangement is expected to boost Obamacare enrollment, lower costs, and ensure some employees stay covered during the pandemic, state exchange officials say.
Individual coverage health reimbursement arrangements (ICHRAs) allow employers to reimburse their workers tax-free for individual health insurance that they purchase on the exchanges. The Trump administration created ICHRAs through regulation in an effort to provide cheaper, alternative health options for consumers.
Businesses are finding that they can save themselves and their employees money by using ICHRAs to fund individual plans in the Affordable Care Act market, Kevin Patterson, CEO of Connect for Health Colorado, the state’s health insurance marketplace, said. That in turn is expected to lead to more ACA enrollment through the exchanges, rather than in insurance plans that companies have traditionally funded.
“They can at least come through with an ICHRA and actually find something that we would help them find on the exchange,” Patterson said. “That’s a way to actually grow the individual market pool,” which keeps premiums competitive, he said.
Individual plans are likely more affordable for employers than having to cover each employee through small group health insurance plans, industry officials say. With so many businesses struggling to survive during the Covid-19 crisis, ICHRAs offer them an opportunity to keep workers insured.
“We’re definitely seeing some interest” in ICHRAs from companies with 10 to 300 employees, particularly in areas where small group premiums rose in 2020 and individual rates are falling, Catherine Perez, co-founder and chief product officer of health insurance web broker HealthSherpa, said.
“We’re mostly seeing that kind of really take off on the small group side,” she said.
HealthSherpa, based in Sacramento, Calif., handled more than 15% of the volume on the federal HealthCare.gov marketplace during the open enrollment period for 2020.
Under a health reimbursement arrangement, employers can set up accounts for workers to use for out-of-pocket medical expenses. The administration’s regulation expanded employers’ ability to offer those accounts by creating ICHRAs, which can be used to buy individual insurance coverage. The regulation applies to the 2020 plan year and beyond.
The new arrangement can be an affordable alternative for large and small companies to retain coverage for employees as they grapple with how to maintain their businesses during the Covid-19 pandemic, said Heather Korbulic, executive director of Silver State Health Insurance Exchange, which operates Nevada Health Link.
Millions of people throughout the country are losing job-based health insurance during the crisis. ICHRAs can’t help those who lost their jobs, but they can help those who are still employed yet face the risk that their employers won’t have enough funds to keep their insurance going, Korbulic said.
“What we’re really trying to do at Nevada Health Link is show up for these people in a way that allows for us to not only capture them when they fall off of their employer-sponsored insurance, but to also show up for companies,” Korbulic said.
The Nevada exchange is training brokers and navigators, who help people enroll in ACA plans, to understand ICHRAs and has posted information about them on its website. About 77,000 people enrolled in Nevada’s individual exchange as of early this year, she said.
“We want to help businesses that are willing to offer their employees ICHRAs an opportunity to learn about them now and see if that might end up being a savings for them,” Korbulic said.
Making the Switch
Small businesses and nonprofits in Colorado, among other states, are already planning to offer ICHRAs to their employees.
Team Summit Colorado, a nonprofit youth development organization based in Frisco that coaches skiers and snowboarders for competition, will cover its employees through an ICHRA in October, executive director C.B. Bechtel said.
Bechtel said he expects the company can expand its health insurance coverage to 16 employees for about the same $30,000 a year that it now spends on an Anthem small group plan covering seven employees.
Employees can choose their own plan on the state exchange or they can buy an ACA-compliant plan through a broker, Bechtel said. Most will likely use the state exchange because it will give them more choices, he said.
Peak Health Alliance in Keystone, Col., a health-care purchasing collaborative that negotiates rates with providers and insurers, is also turning its focus from small group plans to ICHRAs, according to CEO Tamara Pogue.
The alliance offered a small group product in partnership with Rocky Mountain Health Plans this year that cost about 15% less than prior small group plans, Pogue said. “But what we heard from our small employers was that that still was not enough of a decrease to actually make health insurance attainable,” she said.
Premiums in the individual market in one county of western Colorado are 20% less than per-employee costs for small group plans, Pogue said. For 2021, Peak Health Alliance will only offer individual plans to members rather than small group plans, she said.
“The way small businesses can access those plans is through ICHRAs.” Pogue said. “Preliminarily we’re hearing a great deal of interest.”