Busting Myths: The Top 5 Misconceptions about ICHRA

Have you ever felt overwhelmed by the complexities of health insurance jargon? Trust me, you're not alone. 

From personal experience, I know the convoluted labyrinth of terms, rules, and stipulations that confront individuals when navigating healthcare: PPOs, HMOs, ACA - the list seems endless. If you're up for a mental marathon, try scrolling through this government website full of acronyms you might stumble upon in your insurance and healthcare-related documents. It's guaranteed to give both your mind and scrolling fingers an intense workout.

It feels as if the system is designed to be confusing when you look at resources like this. But when it comes to Individual Coverage Health Reimbursement Arrangements (ICHRAs), I've observed that it's not just complexity that confuses people; there's a proliferation of misinformation—some disseminated intentionally—that distorts the truth and misleads individuals.

This is something the Venteur team and I refuse to accept. So today, I'm on a mission to debunk the myths surrounding ICHRAs. It's time to replace the half-truths and misconceptions with accurate, up-to-date information. 

Here are the five most common misunderstandings I've come across:

1. "The ACA is fundamentally flawed"
2. "ICHRA plans limit consumers’ access to healthcare"
3. "Employers can discriminate under ICHRAs"
4. "ICHRAs are only for small businesses"
5. "ICHRAs will cause the ACA to collapse"

These misconceptions aren't merely harmless errors; they're substantial roadblocks. They prevent individuals and businesses from recognizing the potential of ICHRAs and leveraging them to transform their healthcare experience. 

So let's go through these myths one by one for what they are, and reveal the real value of ICHRAs.

Myth #1: The ACA (Obamacare) is fundamentally flawed

One of the most enduring misconceptions I've come across is the notion that the Affordable Care Act (ACA), also known as Obamacare, is fundamentally flawed. This misconception has relevance to ICHRAs because, at their core, ICHRAs involve purchasing coverage through an ACA plan.

This belief seems to have its roots in the turbulence of the early 2010s when several insurers exited the market. However, a lot has changed since then, and in 2017 the market experienced a pivot moment and has since stabilized. Duke University researcher and health insurance policy expert David Anderson has written extensively about this topic, and you can see the changes in this chart below (thanks for bringing to my attention David! Source).

I recently talked to the Chief Actuary of a major insurer who noted a critical mass of people are now on ACA plans and remain on them, providing a predictable basis for pricing and design. 

What does that mean in lay people terms?

In short, we now know how to create ACA plans that work. They are not only for the "sick and poor," as some believe. And today ACA plans cover a diverse range of Americans, providing them with essential health benefits and protections.

Research supports this change. Multiple studies published in the American Journal of Public Health tracking access since ACA was passed found that it had resulted in significant improvements in healthcare access, affordability, and health outcomes, particularly among elderly and socioeconomically disadvantaged populations. 

It's essential to remember that any healthcare policy, including the ACA, can and should be improved upon. However, writing off the ACA as fundamentally flawed is a vast oversimplification that ignores the beneficial impacts it has had on millions of Americans' lives.

Myth #2: ICHRA plans limit consumers’ access to health care

Another common misconception is that ICHRAs are associated with narrow healthcare provider networks. This misunderstanding likely stems from the term "network" itself. 

When we think of networks in the context of traditional group health insurance plans, we tend to think of vast arrays of providers. But when it comes to individual healthcare, this "one-size-fits-all" approach isn't necessarily a benefit. 

For individuals and families, it's less about having access to every doctor in a 50-mile radius, and more about having access to the right doctors — those who meet their specific healthcare needs. The flexibility of ICHRAs allows for more personalized healthcare experiences, as they enable individuals to choose the plans that best suit them, even within a single family. 

In a recent study on ACA from the Kaiser Family Foundation, consumers in HealthCare.gov (the ACA marketplace) states have a choice of 6 to 7 qualified health plan issuers in 2023 on average. In an even more positive trend, in 2023 92% of enrollees will have a choice of 3 or more qualified health plan issuers, up from 89% in 2022. This variety of options means that ICHRA users can choose the plan with the network that best suits their needs.

Broad networks are not inherently superior to more tailored ones. The true measure of a healthcare plan's value lies in how well it matches the unique needs of the individuals it covers. By giving employees the flexibility to choose a plan that best suits their needs, ICHRAs are in a unique position to provide exactly that.

Myth #3: Employers can discriminate under ICHRAs

The idea that employers can use ICHRAs as a tool for discrimination is far from the truth. In reality, ICHRAs are governed by strict rules defined under the Employee Retirement Income Security Act (ERISA), which prevent such practices.

These rules clearly [define 11 distinct employee classes for the purpose of providing ICHRA] (https://www.venteur.co/post/ichra-employee-classes-and-why-it-matters)benefits, including full-time employees, part-time employees, employees working in the same geographic location, seasonal employees, and others. The purpose of these categories is to prevent employers from discriminating against specific groups when offering healthcare benefits. Moreover, there are affordability requirements that further protect employees from discriminatory practices.

A study conducted by Nicholas Tippman of the University of Illinois points out that the traditional group plans, which are often chosen and defined by a few key individuals in the company, could potentially suffer from structural discrimination issues. These plans, they argue, may not adequately represent the diversity of the employee pool, instead being inadvertently tailored towards specific demographics. 

ICHRA's design, by contrast, helps alleviate such concerns. With ICHRA, each employee is empowered to choose their own health plan within the limits set by the employer, thus making the decision-making process more inclusive and less prone to unintentional bias. 

Far from promoting discrimination, ICHRA provides a more flexible, inclusive, and personalized approach to employee healthcare benefits. 

Myth #4: ICHRAs are only for small businesses

This myth couldn't be further from reality. ICHRAs are not only for small businesses, but also for organizations of any size that value the advantages they offer. The flexibility, cost-effectiveness, and personalization aspects of ICHRAs make them an attractive option for all businesses, irrespective of their size.

On average, organizations have reported a cost savings of about 20% after switching to ICHRAs. One hospital we work with in the southern United States managed to save over $7 million by implementing ICHRA, and employees still were able to get full-family benefits. 

I’d say any insurance instrument that has the potential to save providers and health systems millions of dollars while giving people access to customized care is viable and efficient.

Want the full details from the case study? Click the link, send us a message, and we’ll share it with you.

Myth #5: ICHRAs will cause the ACA to collapse

Contrary to this belief, ICHRAs can actually strengthen the ACA by expanding its reach. There's a concern that businesses with high-risk employees might drive up costs on the ACA marketplace, but there are several reasons why this fear is unfounded.

Firstly, the ACA uses a method called [experience rating for businesses] (https://www.freshbooks.com/glossary/small-business/experience-rating#:~:text=determining%20employer%20rating.-,Summary,number%20of%20worker's%20compensation%20claims.)with over 50 employees. This involves looking at the past health care usage of the group to determine premiums. It's true that groups with chronic conditions may have a higher experience rating and higher premiums as a result. However, these groups also typically include healthier individuals, who help balance out costs. Furthermore, the larger the group, the less impact a few high-cost individuals will have on the overall premiums.

In addition, ICHRAs promote a healthier ACA marketplace. Businesses currently offering group health plans often have employees who, while not in perfect health, are generally healthier than the uninsured population. When these employees transition to the individual market via ICHRAs, they help create a healthier risk pool, which can help stabilize, not collapse, the ACA.

In short: Instead of destabilizing the ACA, ICHRAs can play a crucial role in promoting a more inclusive and balanced healthcare marketplace.

Final thoughts

It's clear that many misconceptions exist around ICHRAs. They often stem from outdated information or misunderstandings. 

Here’s the final takeaways from all the myths we’ve busted around ICHRAs:

1. The ACA is not fundamentally flawed but has evolved over time to stabilize and offer quality insurance options.
2. ICHRAs allow for personalized, custom coverage that can better cater to individual needs.
3. ICHRAs do not enable discrimination. They come with built-in protections, and in fact, allow for more equitable health benefits among different classes of employees.
4. ICHRAs are not just for small businesses or those with no other options. They can be beneficial for businesses of any size.
5. ICHRAs won't collapse the ACA. Instead, they have the potential to strengthen it by expanding its reach and promoting a healthier marketplace.

As we navigate the intricate landscape of health insurance, it's crucial to separate fact from fiction. 

That's where we come in. 

At Venteur, our mission is to demystify complicated insurance plans and help you find the best option that suits your unique needs. We believe in the power of choice, and we are here to ensure that you have all the accurate information to make the right decision.

Reach out now to our team of advocates - let us cut through the noise and misinformation for you, and together, we'll find the healthcare plan that truly works for you, your business, and your employees. 

You deserve nothing less.