Why ICHRA premium payment errors happen, and how to prevent them

The individual coverage health reimbursement arrangement (ICHRA) offers a flexible alternative to traditional group insurance plans, helping organizations of all sizes combat annual premium increases. But the ICHRA is new to many employers, employees, and benefits consultants, which can lead to confusion about certain aspects of benefit administration, particularly ICHRA premium payments.

Premium payment errors can disrupt health coverage, frustrate employees, and create distrust in your ICHRA benefit. But with the proper process and the right ICHRA administrator, you and your employees won’t have to worry about missing a payment.

This article will help you understand common ICHRA payment issues and how to prevent them, whether you’re considering an ICHRA for the first time or transitioning to a new benefit administrator.

In this blog post, you’ll learn:

• The most common premium payment mistakes employers and brokers face when administering their individual coverage HRAs.
• Why ICHRA premium payment errors happen and how they can interrupt employee coverage.
• How Remodel Health helps to prevent payment errors and reduce administrative burden.

1. Double premium charges to insurance companies

Double premium charges are one of the most common ICHRA premium payment errors. In many cases, this happens when an employee enrolls in a new individual health plan but forgets to cancel their previous coverage. The insurance company may continue billing them for the old health plan even though a new policy is in effect. Employees may not even realize they have two active policies until they see duplicate charges on their bank statements.

If you’re new to the ICHRA, you may not notice the coverage overlap right away, especially if you’re using an autopay system or processing manual tax-free reimbursements. But preventing this error is key to avoiding unnecessary costs and irritated employees. Ensure you confirm your employees’ termination dates for their past coverage and coordinate ICHRA enrollment carefully with the new health plan.

2. Errors in premium payments when switching to a new ICHRA vendor

Transitioning from one ICHRA vendor to another can be a premium payment pitfall if not done correctly. The previous vendor may continue processing payments after the new vendor takes over. Another possibility is that payments may not begin on time under the new system. Even a short gap in premium payments can result in carriers delaying or canceling an employee’s health plan.

This issue is typically due to misaligned plan effective dates or incomplete employee data transfers. When switching ICHRA administrators, create a plan that outlines which vendor is responsible for paying premiums during the transition period and confirm when payment systems will begin and end.

3. Premium autopayments not sending to employees’ accounts on time

Many employers promise automated systems to simplify ICHRA administration. However, the reality is that many ICHRA platforms are built on payment architectures that crumble under the weight of real-world billing cycles. If an ICHRA vendor’s autopay process fails or doesn’t integrate with an insurance carrier's billing system, the payments may be late. Insurance carriers typically have strict grace periods. If they don’t receive the premium by the deadline, they may cancel your employees’ policies.

Late payments can create unnecessary stress for employees who don’t expect interruptions in their health coverage. Preventing these disruptions requires reliable payment processes, careful tracking, and good communication with your employees.

Fragile payment systems leave HR teams acting as a help desk for a health benefit that was supposed to save them time. Instead of the seamless experience promised, the vendor leaves the employer to manage the fallout from a fragmented process.

While other ICHRA vendors leave employers to bridge the gap between their software and the carrier, Remodel Health’s AutoPay helps to mitigate that risk. Our industry-leading payment solution has 99%+ accuracy automatically, with our team standing by to catch errors before they reach employers or employees. We’ll share more about our industry-leading payment solution later in the article.

4. Discrepancies in health insurance plan premium amounts

Premium rate adjustments can happen for various reasons, such as dependent additions or removals, plan changes, or mid-year eligibility updates. However, when employees or employers see a change they don’t expect, they may be alarmed that there has been a billing mistake.

Inaccurate data entry or failing to confirm the correct premium at the start of the plan year can also be an issue. If the recurring amount entered into an AutoPay or reimbursement system doesn’t match the employee’s actual premium, it can result in recurring over- or underpayments. Early verification, continuous checks, and educating your employees about possible premium adjustments are key to preventing unnecessary confusion.

5. Employee miscommunication regarding receiving premium bills from insurers

Employees will typically receive monthly premium billing notices from their insurer when they enroll in a health plan. Most insurance carriers haven’t adjusted their billing systems to accommodate all the ICHRA’s features, so they may still send payment notices to enrollees. Even if the ICHRA administrator is already paying the premiums on their behalf, employees may receive a notice and pay the bill themselves. While this is an understandable reaction to the fear of their policy being cancelled, it can result in unnecessary double payments.

Preventing this potential error is easy. With proper education and clear communication during the ICHRA onboarding process and throughout the plan year, you can help employees understand what billing notices mean and how the ICHRA payment process works, so they don’t feel fearful or confused.

How Remodel Health streamlines ICHRA premium payments and prevents errors from happening

Rather than relying on manual reimbursement models or makeshift processes, Remodel Health’s full-service ICHRA+® administrative solution mitigates the most common premium payment errors employers worry about when offering an ICHRA.

Our payment system features an innovative AutoPay function, which automates premium payments for employers and employees. On a pre-selected monthly date, we transfer premium funds from your company’s bank account into individual FDIC-insured accounts for each employee. Then, our system makes secure, timely premium payments to your employees’ insurers. Our financial operations specialists carefully track this process each month, ensuring each payment is accurate and complete, reducing the risk of late or duplicate payments.

Here’s how Remodel Health helps to prevent common payment errors:

1. No more double premium charges. Our platform tracks and substantiates each employee’s active coverage, ensuring they pay only the appropriate premium. Employers and employees won’t accidentally pay for old policies, as Remodel Health confirms billing for the current health insurance plan and reminds employees to cancel any prior payments.
2. Smooth vendor transitions. When switching from an old ICHRA vendor to Remodel Health, our onboarding team manages effective date timelines. We’ll ensure payment processes begin and end accurately, eliminating coverage gaps or overlaps.
3. On-time autopayments. Our AutoPay and direct carrier payment system processes your employees’ premiums with over 99% accuracy, preventing coverage lapses that can occur with a manual reimbursement process or unreliable autopay method. We’re proud to say that we have a 100% success rate for premium payments with appointed carriers. Our team monitors these payments every month to catch and fix any errors.
4. Accurate premium amounts. Our system pulls employee premiums directly from carrier data and double-checks the amounts by reconciling against payroll reports, ensuring you and your employees pay the correct amount each month. This reduces discrepancies caused by data entry errors or outdated information.
5. Clear communication to employees. Remodel Health’s support team explains to your employees how we process premium payments on their behalf during ICHRA onboarding. This minimizes confusion or surprise about billing statements and prevents potential double payments.

Conclusion

ICHRA premium payment errors can result in coverage gaps, duplicate charges, and employee frustration, all of which can lower benefit utilization. The good news is that many of these errors are preventable. By partnering with an HRA vendor that specializes in white-glove service, innovative automation tools, and robust employee education, you can rest easy knowing your staff will never miss a payment deadline.

Here at Remodel Health, we built our ICHRA+® administration solution to streamline premium payments and reduce errors before they happen. Want to learn more about what we offer? Book a call with us today!