Can you change ICHRA administration vendors midyear?

The key to offering an effective individual coverage health reimbursement arrangement (ICHRA) lies in how you administer it. There are many ICHRA vendors out there, but not all of them offer the same level of support and features. If you’ve become frustrated with how your current vendor is handling your benefit, you may want to make a change — even if it’s in the middle of the plan year.

Switching your ICHRA administrator midyear might feel daunting. But for many employers, it’s worth the effort. To help you get started, this article outlines the key steps to ensure a smooth, compliant, and minimally disruptive transition, so you can continue offering the best ICHRA possible to your employees.

In this blog post, you’ll learn:

• How employers can switch ICHRA administration vendors midyear and why many choose to do so.
• The key steps involved in making a smooth and compliant midyear ICHRA vendor transition.
• How to prepare employees for the change so they experience minimal disruption or confusion.

Is it possible to change ICHRA administration vendors midyear?

Yes, employers can switch ICHRA administration vendors in the middle of the plan year. There’s no federal rule requiring you to stay with an administrator for the full length of the plan. So if your current vendor isn’t meeting your expectations, you can make a change at any time. 

Employers may consider a midyear switch for the following reasons:

1. Service concerns. If response times are slow, support is inadequate, or employee communication is inconsistent, employers and HR teams may become frustrated and seek a full-service ICHRA partner that better meets their needs.
2. Pricing issues. Vendors that unexpectedly increase fees at renewal or charge extra for every administrative task can push employers to explore more reliable and affordable ICHRA options.
3. Poor employee experience. When employees struggle to submit claims, get reimbursements or payments on time, or navigate a complicated platform that isn’t intuitive, it reduces the benefit’s value and can result in low utilization.
4. Compliance issues. To comply with federal guidelines, ICHRAs must adhere to careful documentation and reporting requirements. Employers who aren’t confident their vendor is managing plan documents, notices, claim substantiation, or employee privacy correctly may want a more compliance-focused provider.
5. Administrative burden. If you or your broker consultants are spending too much time troubleshooting the ICHRA, coaching employees, or managing the benefit, it might be time to switch to a vendor that reduces your workload.

Although it may seem like a hassle, switching vendors midyear can help you improve employee satisfaction and ensure your ICHRA is performing to its best ability.

What steps must employers take to ensure a smooth midyear transition to a new ICHRA administration vendor?

After you research which vendor you want to work with, there are several steps you must take to make sure your midyear transition runs as smoothly as possible for you and your employees. For example, you don’t want your employees to experience a coverage gap, miss any compliance requirements, or rush your benefit design process. 

If you’re worried about making a mistake during the transition process, don’t panic! The following eight steps will help guide you in the right direction.

Remodel Health makes it easy to switch to our ICHRA+® administration solution midyear. Read our blog to find out more about how the process works.

1. Notify your current ICHRA vendor.

Before making any transition, your first step should be contacting your current ICHRA vendor. This ensures you understand and fulfill all your contractual obligations — such as required notice periods, termination procedures, and final billing statements — and helps you avoid unexpected fees or delays.

Once you begin the cancellation process, request that your current vendor provide you with any information that your new administrator will need for the transition. 

This typically includes: 

• A list of employees enrolled in the ICHRA
• Contribution amounts and balances
• Year-to-date reimbursement histories
• Substantiation and attestation records
• Plan documents and notices
• Any outstanding claims that are still in review 
• Data required for IRS tax reporting

By notifying your existing vendor and collecting all your necessary documentation ahead of time, your new administrator will have an easier time setting up your ICHRA, and you’ll help prevent disruptions to your employees’ coverage. 

2. Choose the right effective date.

Selecting the right effective date is one of the most important steps in a midyear switch. It’s vital that the new ICHRA vendor’s start date begins immediately after the outgoing vendor’s end date. Any mistakes can cause a gap in ICHRA contributions, a delay in claim payouts, or leave employees without access to their ICHRA during the transition.

Use the combined experience of both vendors to determine the right start and end dates for your company. You should also confirm when employees will lose access to the old platform and gain access to the new one, so the switch is as pain-free as possible. It’s also necessary to clarify which ICHRA vendor will approve and pay for any outstanding claims after the transition.

3. Prepare your employees for the switch.

Employee communication is crucial during any midyear transition to ensure trust in you as an employer and in their new vendor. Clear and frequent messaging helps employees understand what is and isn’t changing, when the shift will happen, and how it will affect their ICHRA experience. 

For example, ensure your employees know the following:

• Provide them with the benefit’s new effective date so they have time to prepare.
• Loss of an employer-sponsored health benefit, such as terminating your existing ICHRA, is a qualifying life event. This means your employees will have a 60-day special enrollment period to change their qualified individual health plans. However, they aren’t required to participate in the enrollment period. They can keep their existing individual health plans if they choose. 
• Reassure them that their ICHRA contributions and past claim histories for the plan year to date will stay the same, despite the change in vendor.
• Give them detailed instructions on when and how to log in to the new platform, submit claims, and access customer support.

Employers should also offer resources, such as tutorials, FAQs, or educational videos, on the new vendor and its features. This allows employees to ask questions or receive hands-on support navigating their new ICHRA platform, which can help reduce confusion and maintain high employee engagement. 

4. Update your ICHRA’s plan documents.

A midyear vendor change often requires updating your ICHRA’s legal plan documents, including the administrative procedures, claim payment methods, and contact information. In many cases, this is due to differences in technology, workflows, or processes between administrators, or simply due to major changes in benefit design. 

Employers should work closely with their new ICHRA administrator to ensure that they create accurate and compliant plan documents before the benefit’s effective date. Once the documents are complete, ensure that your employees know where and how to access them, as well as who to contact if they have any questions.

5. Ensure proper data migration.

Accurate data migration is key to a successful transition. If you miss any information, you may experience delays with claim payouts or compliance risks.

Double-check that the following information completely and accurately transfers from your current administrator to your new one: 

• Enrolled employee rosters
• Employer contribution balances
• Reimbursement histories
• Outstanding claims

Before migration begins, confirm that both administrators have secure file transfer procedures in place and will follow HIPAA guidelines regarding your employees’ protected health information (PHI). Once the migration is complete, review a summary of the imported data to verify that nothing is missing and the current information is secure on the new platform before the benefit’s effective date.

6. Consider your employees’ ICHRA contributions.

Something that your employees are likely going to worry about the most is their ICHRA contributions. Your new vendor must account for the total annual allowance, any amounts already reimbursed, and the remaining balance for each employee. This prevents overpayment or underpayment, ensuring compliance with the monthly limits outlined in your plan design. 

You should also confirm details about the claim payment process during the transition period. Some employers may choose a set end date for employees to submit claims to their current vendor and a specific start date for the new vendor, ensuring there’s no overlap. Whichever method you choose, coordinate with each vendor and communicate with your employees throughout the process to avoid surprises.

7. Double-check your ICHRA’s compliance requirements.

Your new administrator must ensure all substantiation, eligibility verification, and reimbursement processes continue to meet IRS requirements without interruption. This includes reviewing how your current vendor handled employee claims, conducting documentation reviews, and maintaining accurate records. If they find any gaps or problems, they can correct the issues before creating a long-term compliance risk.

If your company is an applicable large employer (ALE), then you must meet the Affordable Care Act employer mandate requirements. This means your ICHRA must continue to offer affordable coverage to 95% of your full-time workers and their dependents throughout the transition. Any errors in affordability calculations, employee classes, or offer of coverage could put you at risk of costly penalties. ALEs must verify that the new vendor understands their Affordable Care Act obligations, so they remain consistent with federal regulations.

Lastly, midyear changes will likely result in extra employee communications. Your incoming vendor can help determine what notices or documentation updates you must send to ensure compliance and provide employees with a clear understanding of the changes to their benefits.

8. Review your IRS reporting obligations.

Switching administrators midyear can affect how you’ll handle your IRS reporting requirements. Beforehand, you should determine which vendor will collect and compile reporting data for the entire year. Some employers may prefer their old vendor to report for the months they administered their plan, while others may assign all reporting tasks to the new vendor for consistency. 

In either case, determining what strategy you want to use beforehand helps to avoid duplicate filings or missing information. Recordkeeping errors or incorrect tax forms can also lead to affordability errors or result in penalties. Therefore, confirm that your new vendor can integrate midyear data and produce accurate reports, so you avoid any issues with the IRS.

Why organizations switch to Remodel Health for ICHRA administration

Remodel Health is the ICHRA administration partner that brokers and employers trust. Our innovative ICHRA+ platform, designed for large and enterprise employers, offers a comprehensive, full-service approach to ICHRA administration. Our licensed experts and white-glove customer service are here every step of the way to ensure a seamless ICHRA transition. 

With Remodel Health, you get access to automatic payments for health insurance premiums, so your employees don’t have to front the cost of their premiums and wait for reimbursement. Our AutoPay features are backed by an expert team and FDIC-insured bank accounts for each employee with overdraft protection. 

New employees or those switching plans as part of their transition can shop for health insurance through the ICHRA+ platform and receive assistance from in-house, licensed advisors, including those specializing in Medicare enrollment. 

Finally, we provide comprehensive compliance support, including required ICHRA notices, plan documents, data for Form 1094 and 1095 filings, and Medicare.

Conclusion

Changing ICHRA vendors midyear is not only possible, but it may be the only option if you’re looking for a better employee experience and greater support. By doing your research and preparing for the transition, you can avoid gaps in coverage and protect your organization from unnecessary risk. 

At Remodel Health, we aim to make your midyear transition as smooth as possible for your organization. Our dedicated team of experts is standing by to ensure your ICHRA continues to meet your goals while delivering the top-quality support that you deserve. Interested in learning more? Book a call with us today!