Individual Coverage HRAs (or ICHRA, pronounced “ick-ruh”) are among the newest healthcare innovations, having just been released in January 2020. ICHRAs allow employers to give employees a budget to spend on healthcare rather than providing the insurance product itself.
The Department of Labor projects 800,000+ employers will move away from traditional group plans and toward the ICHRA model in the coming years. This shift toward individual benefits allows employers to provide quality coverage to employees while still remaining within their predetermined budget.
With the establishment of this new Individual Coverage HRA, we are excited to introduce our own exclusive version, called ICHRA+®. Our model takes advantage of the updated rules and opportunities of ICHRA, while also infusing it with our own proprietary solutions. Here’s an overview of ICHRA+®, how it works and why it helps:
1. Personal Selection
Research shows that the majority of employers offer less than four options when it comes to health benefits, and only 1% even offer up to four. (Most offer just 1-3 plan choices.)
With ICHRA+®, employers are able to provide up to 10X more options to employees. This means families are able to find plans that actually fit their individual needs. ICHRA+® gives employees the power to invest in their own healthcare.
That being said, it can feel overwhelming for employees to choose their own plan from the 30+ options available on the Individual Marketplace. Thankfully, that’s where ICHRA+® can help. Remodel Health provides your employees with a personal benefits coach to help them evaluate their options and spend their budget well.
2. Pre-Tax Dollars
Generally speaking, medical expenses as defined by the U.S. Code § 213 have been tax free for quite some time. However, standalone HRAs have not been available since the passing of the Affordable Care Act, when HRAs were defined as their own plans. Because plan regulations disallowed lifetime limits and required minimum essential coverage, HRAs ceased to exist altogether.
This remained true until this year, when Individual Coverage HRAs made their grand entrance to the healthcare industry. ICHRA’s new rules allow its HRA dollars to be used toward both premiums and medical expenses (depending on how the arrangement is written). The pre-tax benefit of ICHRA means the tax liability on the employee will not increase for receiving the benefit.
For example: If a $6,000 annual ICHRA budget was taxed, and the employee was in the 20% tax-bracket, they would have to pay around $1,200 in taxes on those ICHRA dollars. This is why the ICHRA dollars being pre-tax (also called “untaxed”) is so beneficial for the employee.
3. Tax Credit Discounts
Interestingly enough, pre-tax benefits are not always the most beneficial option for the employee or the employer. Remember, individual products have individual prices based on individual people. This means the cost of individual products can have quite a range, depending on who and what they’re for. Most importantly, they can be dramatically less expensive if you strategize correctly.
For some employees, Advanced Premium Tax Credits (which work like discounts on individual insurance products) can be a better payoff than pre-tax benefits. These discounts allow both the employer and employee to save money on health insurance products, while still getting access to the same great plans.
Remodel Health’s proprietary wage increase model harnesses the power of tax credit discounts, providing employees the power of choice and employers the power of organization. Wage increases let employers cut healthcare costs drastically while still caring for employees well.
An issue arises, though, when combining supplemental wage increases with ICHRA dollars. This is where the power of ICHRA+® with Remodel Health comes into the scene. We combine ICHRA plus wage increases to ensure that employees utilize the strategy that is most beneficial for their unique situation. When it’s most beneficial for the organization and the team to have pre-tax benefits, we harness ICHRA. But, when it’s best to offer the post-tax with tax credit discount options, we harness wage increases.
4. Ongoing Personal Care
Did you know that only 4% of Americans accurately understand the most basic insurance terms? For example, deductible vs. out-of-pocket max, or copay vs. coinsurance. Properly understanding these terms is crucial to not only picking the best plan, but also utilizing that plan properly.
ICHRA+® with Remodel Health allows you to give your team a single point of contact with an industry expert all year long.
Our Care Team is dedicated to ensuring your administrative staff is not bogged down by the never-ending questions surrounding healthcare. Furthermore, we ensure your staff and their families are not left in the dark when it comes to plan procedures, billing and more. With Remodel Health, you and your team always have someone to help you through healthcare.
Can ICHRA+® work for your team?
Check out our full ICHRA Guide and take our simple quiz to see what alternative health benefits solutions can best help you cut costs and care for your team. You can even run your own savings estimate using our online calculator. If you’re interested in connecting with one of our expert benefits consultants to run a free, full evaluation of all your options, email us at [email protected].
Important Notice: Remodel Health does not intend to provide specific insurance, legal, or tax advice. Remodel Health always recommends consulting with your own professional representation to properly evaluate the information presented and its appropriate application to your particular situation.
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