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Controlling Cost and Risk: Is an ICHRA Right for Your Business?

Employers are constantly facing the battle of providing competitive healthcare benefits while being mindful of the increasing costs and risks associated with this benefit. They know that health insurance is critically important to their employees, but not everyone has the same individual or family needs.  The federal government recognized that if employers were able to somehow reimburse employees to purchase plans that fit their needs, many individuals would take advantage of this.

As such, a solution was enacted into law as of 2020 and many businesses who have chosen the Individual Coverage Heath Reimbursement Account (ICHRA) for their employees have shifted from a high risk, high-cost environment to a more controlled, low-risk health benefit offering. With an ICHRA, the employer does not have to manage a health plan every year. Instead, employers offer tax-free dollars to their employees and allow them to purchase health insurance in the individual marketplace. An ICHRA is straight-forward in that it works like any reimbursement. As employees spend their money on health insurance and other qualified health needs, they show their employer proof of that spend and receive tax-free reimbursement for those dollars up to the defined benefit.

For the employer, the ICHRA provides flexibility in that they do not have to treat all classes of employees the same. Employers can set the ICHRA offering by various class of employee and thus offer enhanced benefits to some, but not all. This may be attractive to ensure that valued employees who serve the organization at a specific level may not be lost to a competitor with “better benefits.”

The ICHRA is also attractive in that the employee has the ability to choose the health insurance plan that is best for them and their anticipated healthcare needs. When they spend on healthcare and receive reimbursement from their employer, the reimbursement is not taxable and thus does not increase their taxable income. The ICHRA benefit becomes a true differentiator and can lead to staff retention.

There are pros and cons when considering an ICHRA.  Having a benefits consultant by your side to determine whether an ICHRA may be best for you requires expertise and experience. Understanding the differences and nuances between an ICHRA and group health insurance offering is something you should explore and understand before making a choice.  The experts at CGI Business Solutions have the knowledge and comprehensive understanding of the intricacies of these decisions. Learn more about ICHRAs today by consulting with us. ICHRAs | CGI Business Solutions