The ICHRA is one of several health benefits options available to businesses. Depending on the circumstances of the employer, it might be the right choice.
In this section, we’ll compare the ICHRA to the most common health benefits to help you make the right choice for your business.
ICHRA vs. group health insurance
Group health insurance is by far the most common employee health benefit. Businesses that offer it can expect relatively simple employee onboarding and ease in leveraging the benefit to hire and keep talented workers.
Many businesses are increasingly unsatisfied with group health insurance, however. For most, the biggest sticking point is cost.
In 2018, businesses paid an average $1,635 a month for employer-sponsored family health coverage—an increase of 55 percent since 2008, according to Kaiser’s 2018 Employer Health Benefits Survey. That’s a tough bar to meet for many employers, particularly for smaller groups or nonprofits.
Similarly, group health insurance puts business owners in a middleman position between their employees and the insurer. While familiarity may make onboarding and administration easier, many businesses struggle with the time required to properly solve these problems and keep the benefit running smoothly.
HRAs, including the ICHRA, largely solve these problems while also helping employers with 50 or more full-time equivalent employees (FTE) meet the employer mandate.
With the ICHRA, businesses have complete freedom to dictate their budget. By choosing monthly allowance amounts for each employee, they can ensure health care costs never take them by surprise or lead to an imbalanced budget.
Additionally, the ICHRA allows employees to choose their own health insurance policy. This frees them to choose a policy best suited to their needs, but it also frees their employer from having to negotiate between them and their insurance company.
With an HRA administrator like PeopleKeep, businesses offering an ICHRA could likely reduce their health benefit administration time to just 15 minutes a month.
ICHRA vs. health insurance stipends
Frustrated with the cost and complexity of group health insurance, many businesses opt instead to give employees a health insurance stipend.
These stipends are the equivalent of increased wages—they’re a flat amount given to all employees with the hope they spend it on health care, but without formal controls to ensure it’s going to the right place. More importantly, all health insurance stipends are subject to payroll and income tax.
While health insurance stipends allow businesses to control their health care budget and eliminate administration, they’re an informal solution to a formal problem.
Employees are unlikely to consider additional wages a real health benefit, and may not put the funds toward their health needs. Additionally, both businesses and employees are paying a combined 35 percent more in taxes on average than they would with an HRA like the ICHRA.
While the ICHRA requires extra administration, it also delivers full tax advantages to both the business and its employees. It also functions as a formal benefit, with controls to ensure employees have individual health insurance and are using their allowances on qualified medical expenses.
The ICHRA vs. the QSEHRA
The ICHRA closely resembles another recently created HRA: the qualified small employer HRA (QSEHRA).
Created in December 2016, the QSEHRA was the first HRA in many years to allow businesses to offer formal, tax-advantaged health reimbursement to all of its employees. It has helped thousands of businesses offer health benefits and will continue to fill a much-needed role in the future.
The ICHRA offers an alternative, though, and for some businesses, it will be the better choice.
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