ICHRA vs. Group Health Plans: Is an ICHRA Better Than a Traditional Group Plan?
By Team Orca
Sep 7, 2022
Is an ICHRA better than the group plan options employers have relied on for years? If “better” means more flexible, more affordable, and more choices, then yes!
An ICHRA is a revolutionary healthcare insurance model that gives employees the power to choose, while improving employers’ bottom lines
Group insurance plans are rife with problems – they’re cookie-cutter, they’re expensive, and they just don’t work for every employee (or employer)
Employers and employees carry the financial burdens of premiums. With ICHRA, employees are in a bigger risk pool, so premiums won't increase much (if at all).
With an ICHRA, employees get to pick from hundreds of plans and make the choice that works for their unique needs (group plans offer 2 or 3 choices)
It’s easy for employers to design their ICHRA, while group plans are a headache and a half.
You can set your healthcare budget to stay within limits with an ICHRA, but it’s easy to go over in costs with a group plan
There’s no need to sweat over getting people to participate in an ICHRA, but group plans might require up to 70% participation (or more)
If you’ve heard of ICHRAs (and you probably have because you’re here), you should know that the individual coverage health reimbursement arrangement plans are a modern take on employer-sponsored health insurance. It represents what the people want – choice.
For years, employers relied on group insurance plans to get their teams covered. But today’s employees want more. The traditional group plan has shortcomings, like the fact that most only offer two or three plan choices.
Spoiler alert: There’s no way that three plan choices can cover all of your diverse team’s healthcare coverage needs. Your people need flexibility. And healthier employees = happier employees.
You want to keep your star team and attract even more VIP talent, and the only way is by giving them benefits that work for them.
That’s why it’s so critical to know the differences between an ICHRA and a traditional group plan. They’re completely different animals, and one of them is a lot friendlier to your employees.
Why an ICHRA is better than traditional group health plans
The way an ICHRA works is simple:
You design your plan, including budget, eligibility, and spending limits
Your employees shop for the individual market plans they want
Your plan covers valid claims, including premiums and other eligible costs
An ICHRA lets you provide employees with individual health insurance tax-free, and it comes with higher limits and more design flexibility than traditional group plans.
With a group plan, you purchase the insurance for your employees. There’s way less flexibility because you can’t buy all the plans on the individual market.
But simple plan design and execution are far from the only reasons an ICHRA is better than traditional health plans for most employers (and employees).
The benefits of an ICHRA over group insurance include:
Employers benefit from larger health risk pool
For applicable large employers (ALEs) with over 50 employees, the responsibility for employee healthcare spend falls directly in your hands – if you offer a group plan. The risk is equal to the amount of employees in the group plan. Your costs are reflective on who is deemed “higher risk” and will need more health care versus “lower risk” employees. With a smaller pool, that leads to covering more spending and potential cost increases in your premiums.
But with ICHRA, the risk pool is equal to the healthcare marketplace for your state. For you as the employer, that means less fluctuation on risk and cost – and less worry on how to account for increases in premiums. Costs won't skyrocket because of a few high-risk employees affecting the entire pool with their health care coverage needs.
Employees get personalized plan choices
There’s very little choice involved for employees who participate in an employer group plan because these plans rely on a one-size-fits-all model – and cookie-cutter insurance is a bad prospect for people with complex health needs.
A group health plan might offer two or three levels of healthcare coverage, but it’s all the same insurance provider. The network is the same, so your employees’ choices are limited when it comes to choosing doctors and specialists. The same goes for prescription formularies – your employee will have to pay extra if the prescription coverage doesn’t extend to their specialty medication.
With an ICHRA, your employees get to choose the individual market plan that works for them. If they need an expensive medication that one provider covers but the other doesn’t, they can go with provider #1 with no fuss. If they need to see a specialist who’s out-of-network with an insurance provider but in-network with another, they can choose provider #2.
Choice in healthcare changes and saves lives, so personalization is truly the biggest feature of ICHRA, especially for your valuable employees.
Plan design is easy and flexible
Designing group healthcare plans is notorious for being a huge headache. As the employer, you have to navigate deductibles, coinsurance, expensive quotes, contributions, and more. That’s not even considering single versus family limits, which can get sticky.
You’re a busy employer, so you don’t have the time to manage a complicated group plan.
Instead, an ICHRA is simple to design, especially if you work with Venteur to get it done. You still have decisions to make about how much budget to allocate for coverage and how much is available to different employee classes, but Venteur actually implements and administers the design for you.
You get your valuable time back, and your employees get to participate in a plan that’s designed for their benefit. Win!
Save healthcare budget dollars
Group plans give you no control over premium increases, so you’re constantly sweating over healthcare costs that you have nothing to do with.
An ICHRA lets you set a monthly contribution rate – let’s say $500 in premiums per employee, $500 in total costs per employee, or you can set it by the level of coverage (e.g., all Gold plans are covered). If your employees don’t use all of their allowance (or any of it), you keep the difference. And your costs will never go above your monthly limit.
If you care about your bottom line, then an ICHRA is for you. Plus, your employees appreciate that your contributions are tax-free!
No minimums for participation
Group plans are notorious for requiring high participation rates, which can exceed 70%. It’s not easy to get 70% of your workforce to opt into a one-size-fits-all plan! If the plan you offer doesn’t fit their needs, employees are just as likely to opt-out, and you can’t blame them.
If you offer an ICHRA, there’s no pressure to get a certain number of employees to participate. In fact, there’s no participation requirement at all.
We’re confident employees will take ICHRA because of its flexibility for their life situation. Because there’s no participation requirement, however, if your employees decide they don’t want to use their benefits right now, it doesn’t affect the overall health plan or cost you extra in penalties.
ICHRA: The top choice for employers who care
Employees want to be valued as people with needs and dreams. They want to live their best lives and do it in good health.
That means you have to offer benefits that empower your people to take care of their health and put their lives first. Retaining good talent relies 100% on making your team feel like you’re on their side, and one of the best ways to do that is by offering an ICHRA.
People want to be in the driver’s seat when it comes to choices as critical as health insurance. Want to be an employer that people love and value? Think twice about offering a group plan when you could offer a flexible ICHRA instead.
Be the boss of your employees’ dreams – chat with us to learn how easy it can be to get started with an ICHRA!
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