ICHRAs – Truth Exposed from Experience
By Kyle Von Ruden, Employee Benefits Consultant | Principal
When it comes to explaining medical insurance, we think it’s important to use real life examples and first-hand experience. This blog does not use AI and does not pull information from the internet but comes from real life experience. ICHRAs (Individual Coverage Health Reimbursement Arrangements) are a topic that has become front and center with the seemingly never ending and compounding higher group medical premiums. We get it, we feel the pressure ourselves. We’ve moved groups to ICHRAs when it makes sense, it is necessary for an employer to stay in business, or simply fits the company culture.
High-cost claimants and newly approved high-cost prescriptions are trending more frequently and with more severity. Medical renewals are averaging 7% to 12% in Wisconsin depending on certain areas of the state. Having said that, many employers are receiving off-the-chart renewals starting at 20% with some seeing up to 80%. Depending on carriers and networks in WI, ICHRA premiums increased between 6.5% to 35% on 1/1/26 plans. Are ICHRAs the ultimate solution?
What’s Good: Choice and No Medical Underwriting
ICHRAs may be a great program for those employers who want their employees to have choice of where they receive care and design their own plans. ICHRAs pass the responsibility of employers determining what’s best for their staff on to their staff to make these decisions. Individual plan premiums are not determined by underwriting health conditions or gender but typically based on age and where someone resides. Because the demand for ICHRAs is expanding, TPAs (Third Party Administrators) are popping up rapidly. Some are good and have very automated processes and legitimate enrollers to help staff. Some are not. Some employers set up their ICHRA program to reimburse members each month after the member pays the medical premium. Some TPAs allow for the employer to pay alongside the employee’s portion at the same time via ACH transactions. Note, if someone goes on Medicare, the ICHRA must be reimbursed after member pays the full premium. There are many variables to consider before going from a group sponsored plan to the ICHRA program. Note, per compliance and regulations, providing an ICHRA program is still considered an employer group sponsored plan.
Considerations: Good or Bad
Traditional group employer plans typically have 2, 3 or 4 tier premium structures. For example, single employee & family or single employee, employee + spouse, employee plus child(ren) and full family. Under the ICHRA, because the premiums are based on age, resident area and plan design, members will be charged premiums differently. Younger members will likely see lower premiums, older members the opposite. There are various ways to level the premiums but there’s not enough space to go into these. Just know nearly every member will see a different scenario versus the traditional group model where the members all see the same scenario. Picture your employee census spreadsheet showing different carriers, plans and premiums next to your employee names. Do you offer a fixed employer amount regardless of age or do you use age band ratings where you contribute different amounts based on ages, a fixed employee amount regardless of their own premiums or a different structure?
What’s Bad: Network Inconsistency
Individual Policies often do not have the same network as group policies. ICHRAs in Wisconsin are based on 16 different geographic rating areas. Therefore, an individual in one area may have access to a carrier/network that someone in a different area does not have access to. The carriers may not be in the same area that a member would normally have access to under a group plan. Example (1): Someone in a county with a national carrier under a group plan might not have an option to choose this same carrier on the individual market. Example (2): An employee’s spouse with cancer was seeking treatment in Illinois but resided in WI and had coverage under the group national carrier plan. When the employer dropped the group plan and offered the ICHRA, this employee enrolled with the same national carrier but found out their spouse is no longer covered going to a provider outside of WI.
Individual Policies are typically Calendar Year Plan and Deductible. What if your traditional group health plans renew off cycle? For example, July 1st every year. Scenario 1; You enroll everyone on an ICHRA July 1st, then re-enroll the following January 1st to get on a calendar year cycle. In this scenario the deductible may reset twice depending on if the deductible is plan year or calendar year. Or scenario 2; Renew your traditional plan July 1st then wait and enroll everyone into the ICHRA 6 months later January 1st. Knowing the impact of your deductible set up matters.
Compliance Reminders not limited to:
Employee premium portions may be pre-tax deductible if the member is enrolled “off marketplace,” but if the member is on the marketplace, their premium portion would be post-tax.
Affordability for ALEs (Applicable Large Employers) remains unchanged. ALEs sponsoring an ICHRA program still must meet the affordability rules, regulations per the IRS.
ALEs still have to provide 1094 and 1095 reporting, essential coverage, etc. under Section 6065 of the Affordable Act.
How to self-diagnose if an ICHRA is the right solution:
Understand your own group’s risk if you can. This is NO different than considering if you should be fully insured, go into a self-funded captive, level-funded or stand-alone self-funded program. Having data and knowledge is powerful.
Do you have access to reporting on your own group to better understand what medical program you’d benefit the most from? Fully insured employers who don’t typically see any reporting are those with less than 50 employees or less than 50 enrolled. Employers with more than 50 enrolled might get reporting but it’s limited, does not report on individuals, and has a 90-day claims-paid lag. Employers with over 100 enrolled get better reporting but the reporting also has a lag since claims incurred often don’t reflect paid for 90 days. Unless you are self-funded on your own or self-funded within a captive, chances are you aren’t provided enough reporting to fully understand your population’s health (current/ongoing/emerging) and costs, versus premiums charged.
Lastly, phone a friend. It can’t hurt to ask your benefits consultant for references from employer groups they work with having gone the ICHRA route. And weigh the pros and cons not only financially but also if it is a better or worse benefit for your population. We’ve only scratched the surface of the goods and bads that come with ICHRAs, but as they continue to grow in demand we need to hit pause. We need to spend time fully understanding if an ICHRA is a better short- and long-term plan versus the traditional model of a group sponsored health plan. It can be a wonderful program, or it can implode a group. Please do your homework!
You may offer certain “classes” of employees a traditional group health plan and other types of employees an ICHRA. But you can’t offer the same type of employee a choice between. Below is a list of employer and class sizes for ICHRAs:
| Size of Employer |
Class Size Minimum |
| Fewer than 100 employees |
10 employees |
| 100 – 200 employees |
10% of total number of employees |
| 200 + employees |
20 employees |
Employee Class Types (10):
- Full-Time (working at least 30 hours / week)
- Part-Time (less than 30 hours as defined)
- Seasonal (Employees hired short term basis)
- CBA Class – Employees covered by a collective bargaining agreement
- Salaried
- Non-Salaried
- Non-Resident Alien with no U.S. based income, incl. foreign employees working abroad.
- Waiting Period Class – Employers can choose up to 90 days before an employee’s health benefits kick in.
- Rating Area Class – This class can be broken up by employees in different geographical locations.
- Combination Classes – Employers can combine two or more of the above classes to create a new class based on their needs.
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