Switching from a traditional group health plan to an individual coverage health reimbursement arrangement (ICHRA) has many advantages. The ICHRA offers flexibility, predictable cost control, and personalized coverage for employers and employees. But for brokers and benefit consultants, introducing the ICHRA to clients can present difficult hurdles.
Clients may resist switching to ICHRA because they fear switching to a new benefit, worry about employee usage, feel uncertain about the individual market, or have other reasons. However, with the insights in this article, you can overcome these pain points.
Below, we’ll list frequent objections clients have to the ICHRA. We’ll also suggest solutions that brokers can use to help employers see the potential of this innovative health benefit.
In this blog post, you’ll learn:
- How an ICHRA gives employers a flexible, cost-effective way to offer health benefits.
- How to address common concerns employers have about switching to an ICHRA.
- How Remodel Health can support brokers and their clients by alleviating concerns and ensuring a smooth transition to the ICHRA.
Find out why many small businesses are switching to the ICHRA in our free eBook.
What is the ICHRA?
An ICHRA allows employers of all sizes and industries to offer health benefits without the complexity and cost of a traditional group plan. With an ICHRA, your clients provide tax-free funds that their employees can use to pay for their own individual health insurance plans. This flexibility gives your clients’ staff more choices while keeping their benefits budgets in check.
Here’s how it works: The employer sets a fixed monthly allowance that their W-2 employees can use to buy individual healthcare coverage. There are no minimum or maximum contribution limits. So, employers can decide how much to offer based on their company’s business goals. At the plan year’s end, they can review and adjust their allowance amount as needed.
Eligible employees will then use their pre-tax dollars to buy individual health insurance coverage on a public or private exchange. They can choose the affordable coverage that fits their needs, whether a self-only or family plan. As long as they choose a qualified health plan, they can participate in the ICHRA. Their legal dependents can also use the ICHRA if your client designs their benefit to allow them, and each dependent has proper health coverage.
Any business owner can offer the benefit if they have at least one W-2 employee. If your client’s company is an applicable large employer (ALE), offering an affordable ICHRA allowance can help them satisfy the Affordable Care Act’s (ACA) employer mandate.
Common objections brokers hear from their clients when recommending the ICHRA
Even though the ICHRA is rising in popularity and can solve many problems your clients face, many employers are still unfamiliar with it. Immediately addressing concerns is vital to putting your clients’ minds at ease and ensuring a smooth transition. Let’s go over a few hesitations in the sections below.
1. It’s a change in benefit management techniques
Most mid-size or large employers are familiar with managing a traditional group plan. Each year, they select or renew a fully-insured group plan (or set up a self-funded plan), notify employees of open enrollment, automate payroll deductions, and work with their carrier when it’s time to renew.
But the ICHRA relies on defined employer contributions and employees choosing their health plans. This change can feel overwhelming, especially for small teams with limited benefit management resources.
The solution:
- Suggest they use benefit administration software or a third-party administrator (TPA) that can help with management and other tasks. The right benefit administration tool will give them access to licensed advisors, customized plan design, and live support.
- While the ICHRA will initially be different, it can eventually be easier to manage than group coverage. For example, emphasize that the ICHRA offers predictable budgeting, fewer renewal complications, no rate hikes, and no need to work with an insurer.
- Work with your clients’ employees and highlight the advantages of the ICHRA. Discuss how it compares and contrasts with group health coverage so you can address early concerns and get them familiar with the benefit.
Remodel Health can help your clients manage their ICHRA quickly and easily. Brokers and employers receive white-glove support, making the move from other coverage to the ICHRA pain-free. We also help onboard clients’ employees to ensure they understand their new benefits and how an ICHRA can support their unique needs.
2. There’s potential for deductible resets with a mid-year ICHRA benefit
Most health insurance plans have a set calendar-year deductible. But offering a new health benefit, like the ICHRA, mid-year triggers a special enrollment period so employees can drop group coverage and choose an individual plan. This means an employee’s group plan deductible payments won’t carry over when they switch to an individual plan mid-year under an ICHRA.
This issue can be frustrating for employees who have paid for many medical expenses at the beginning of the year. If they have to restart their deductible from scratch, it could lead to significant financial hardship.
The solution:
- Encourage your client to choose a benefit start date that aligns with their current plan year or the calendar year, typically January 1, to avoid deductible resets and a drop in employee morale.
- If their budget allows, suggest they offer a one-time stipend or deductible reimbursement to help workers cover the expense of restarting new cost-sharing goals mid-year.
- Communicate the long-term beneficial trade-offs of the ICHRA, such as greater flexibility and more choice of health plans and provider networks. This may help offset concerns about potential deductible resets.
While a mid-year ICHRA launch is possible, it’s best to avoid it to minimize employee disruption. When you partner with Remodel Health, we’ll work with you and your client to craft the best benefit strategy possible. This will help you choose the right benefit start date and ease your employees’ financial transition to individual health insurance coverage.
3. HR teams believe they’ll lose control of health benefits
HR is usually the central hub for employee benefits questions about traditional group health insurance. They’re at the frontlines for employees asking about coverage options, enrollment, and insurers. This level of involvement is convenient for employees and often positively impacts benefit engagement.
With the ICHRA, most administration and resources will come from a TPA or HRA software. That can leave HR teams feeling lost when employees ask for help. They may also worry about losing control as they no longer directly support their teams.
The solution:
- Have your client explain to their HR team that they’re shifting their focus. Avoiding carrier details, annual negotiations, and enrollment will free up more time for other essential projects, like benefits decisions, budget control, and managing employee morale.
- Choose an HRA administrator who can provide HR with contact information and educational resources so they can direct employees to the right place for support. This allows HR teams to continue to provide trusted internal guidance.
- Many ICHRA platforms allow HR teams to track enrollment status, reimbursements, employee usage trends, and compliance. This gives them valuable insight into the benefit, so they don’t feel left out of the process.
An ICHRA platform like Remodel Health can help your clients support their employees through education, enrollment, plan shopping, and attestation. This can relieve some administrative processes and give your HR team more time to focus on other priorities.Â
4. Employees will feel overwhelmed by the individual market
Your clients’ employees are likely used to having their employer choose their health benefits plan. In turn, they may feel frustrated by selecting a health plan on the individual market, especially if it’s their first time. Clients may also worry that the individual marketplace may not have enough plan or provider choices to support their employees’ medical needs.
The solution:
- Explain the difference between public and private exchanges. You should be able to answer questions on premium tax credits, coverage levels, and provider networks.
- If your client is an ALE, ensure they know how to design an affordable benefit. Then, let employees know they can opt in or out of the ICHRA benefit based on affordability.
- The individual market offers a wide range of plan types based on location, including PPOs, HMOs, and EPOs. Inform employers and employees that each plan offers different covered healthcare services so they can make the best decision for their lifestyle and budgets.
At Remodel Health, our benefits advisors can help your clients’ employees understand their options and shop for individual health plans from our dashboard. This personalized approach empowers employees to take greater control over their coverage and health outcomes.
5. The ICHRA may not integrate with other benefit administration tools
Most employers use various HR and benefits administration systems to track enrollments, payroll, compliance, and more. Traditional group health plans coordinate with these systems easily. But the ICHRA often uses a separate platform or TPA that may not integrate with the employer’s other applications. Using multiple systems can lead to frustration and inefficiencies.
The solution:
- Understanding your client’s existing systems will help you address integration gaps before implementing the ICHRA and find other solutions to reduce the hassle of using multiple platforms.
- Some HRA administrators, like Remodel Health, offer integrations with major HR and payroll platforms. As a broker, you can recommend vendors that complement your clients’ current programs.
- If integration isn’t an option, many ICHRA platforms offer user-friendly dashboards, reporting capabilities, and payroll sync tools that minimize manual work.
While there may be initial setup friction, the ICHRA can reduce ongoing admin tasks in the long run. Plus, with the right ICHRA software tool, many tasks can run smoothly and quickly, even if they don’t integrate with other platforms.
6. Employers and employees find the ICHRA too complicated
Switching from a group health plan to a new health benefit model can feel daunting. Employees who are used to traditional employer-sponsored coverage may feel like the ICHRA is too difficult to understand. Employers may think it will bring more administrative work and compliance risks.
The solution:
- Most ICHRA software platforms streamline the administrative and compliance process to make running the benefit as simple as possible for employers.
- You can reduce confusion with constant employee communication. Provide education workshops, a benefit implementation calendar, FAQs, and contact information to guide everyone through the process step by step.
- The ICHRA allows employers to divide their staff into employee classes, such as full-time and part-time workers. Your clients can roll out the ICHRA on a small scale by initially offering it to only one employee class, giving them time to adjust to the benefit.Â
While the ICHRA can initially seem complicated, it’s manageable when employers have the right tools, partners, and communication strategy. When you partner with Remodel Health, we help employers design their benefits to relieve confusion about how they work. We also host an employee kickoff call to ensure the staff understands the new benefit and can ask questions.
7. Some employers think the individual market is unstable
Even though the ICHRA offers greater flexibility, the strength and reliability of the individual market can make employers hesitate. Your client may worry that there won’t be enough health insurance options, premiums will be expensive, or the coverage won’t be good enough. These concerns can make employers feel that the ICHRA brings too much uncertainty for employees.
The solution:
- The individual market has stabilized significantly in recent years. In 2023, more than 18 million Americans enrolled in healthcare on the Marketplaces1. More insurers joining the market have led to greater plan options, stable health insurance premiums, and improved provider networks. The individual market is also community-rated, so insurers can’t charge more for those with high utilization or pre-existing conditions.
- An individual health insurance policy is generally cheaper than a group health plan. Employees can work with a licensed advisor to save money on healthcare costs and choose a quality medical plan for their needs and location.Â
- The ICHRA is customizable. Employers can adjust contribution amounts and eligibility classes if the market becomes undesirable.
Today’s individual market is more competitive than ever. Addressing your clients’ fears with recent data and a strong ICHRA design will help them see the ICHRA as an attractive option.
8. Clients don’t see the ICHRA as better than group health plans
Group health insurance has been the most popular health benefit option for decades. Even if employers see the long-term advantages of the ICHRA, it can be tough to make a change. Many employers have offered group health insurance for years and are familiar with how it works. They may view switching to the ICHRA as a hassle without a good reason.
The solution:
- Instead of focusing only on employer control or budget predictability, highlight how the ICHRA offers employees plan portability, greater flexibility, and more affordable coverage options than group health plans.
- The ICHRA allows employers to give their staff tax-free contributions while avoiding complex administrative tasks, working with insurers, and annual rate hikes.
- The ICHRA can support all employees equally, regardless of location. Remote workers can choose the health coverage that best serves their area instead of choosing a one-size-fits-all group plan.
Sometimes, the best way to convince a client is to share examples of similar-sized companies or industries that made the switch successfully.
See how our customers transformed their health benefits in our case studies!
9. The ICHRA has complex compliance obligations
Like other health benefits, the ICHRA must follow specific federal laws, such as the ACA, ERISA, HIPAA, IRS rules, and COBRA. While group plans also have compliance requirements, insurance companies or plan administrators handle most of the responsibilities. Tackling these regulatory requirements alone can make clients feel the ICHRA is too risky.
The solution:
- Most ICHRA administrators offer compliance support, including help with legal plan documents, claim documentation review, privacy guarantees, and reporting tools.
- Help your clients design an ICHRA that aligns with their size, budget, and workforce. This will ensure larger employers meet ACA affordability rules and avoid penalties.
- Provide clients with a compliance checklist so they know what to expect throughout the year. You should also have periodic check-ins to ensure they’re staying on track.
ICHRA compliance doesn’t have to be intimidating. Remodel Health’s ICHRA+ product has pre-set regulatory updates so your clients can stay compliant while minimizing legal stress. We help with plan documents, benefit notices, providing information for Forms 1094 and 1095, and more.
10. Some clients may think ICHRAs are unfamiliar and may hurt recruitment or retention efforts
Most job seekers view traditional group plans as a key selling point in a job offer. They’re familiar with carrier names, premium contributions, and payroll deductions. Employers may worry that going with an unfamiliar health benefit could turn off prospective hires or frustrate current employees.
The solution:
- Stress to employees that ICHRA funds are tax-free and employer-funded, just like traditional benefits—they’ll still have access to high-quality, ACA-compliant coverage.
- Partner with a benefit administrator with licensed advisors, curated plan options, and top-notch support. This will make the ICHRA feel like a premium-level benefit.
- Ask your clients to provide candidates with an ICHRA overview during the hiring process. If their ICHRA has high allowances or covers dependents, highlight those as key features.
Conclusion
The ICHRA is a modern and cost-effective approach to healthcare benefits. However, your clients may be hesitant at first. Many of these concerns are due to their unfamiliarity with the ICHRA. But by working closely with your clients and providing the proper education and resources, you can help them see the ICHRA as the right benefit for them and their employees.
Remodel Health’s ICHRA+® solution makes it simple for every employer to offer a personalized health benefit. We work with you to help you offer your clients an attractive health benefit at a budget that works best for them. Plus, our expert support team guides employers and employees every step of the way, so they don’t have to navigate a new benefit alone.
If you’re ready to set your client up with an ICHRA, contact us, and we’ll get you started!
Walk through every step of Remodel Health’s ICHRA onboarding process in our guide.