3 Splashes of Individual Coverage HRA Cold Water

Practical realities could limit use of the new individual coverage health reimbursement arrangements (ICHRA) program.

Kim Buckey, vice president of client services at DirectPath, a benefits communication firm, talks about the constraints on growth today, in written comments about the ICHRA program.

Small and midsize employers might like the idea of offering an ICHRA, but the problem is that providing health benefits through an ICHRA program could make a complicated activity even more complicated, Buckey says.

Related: 3 Important Details in the New Individual Coverage HRA Regs)

If employers decide to set up ICHRA programs, “they’d better be willing to commit to a lengthy and robust communications campaign, to ensure that their employees understand what it is they are buying,” Buckey says.

The ICHRA Program

Years ago, before the Affordable Care Act health insurance came to life, some employers used “premium-only plans” to give employees cash that the employees could use to buy their own health coverage.

Most of those programs stayed small. One obstacle was that, in most states, employees who were trying to buy individual major medical coverage faced rigorous medical underwriting standards. Employees who had diabetes or were obese might have no practical way to buy coverage.

In January 2014, under ACA rules, insurers began to offer individual coverage on a guaranteed-issue, community-rated basis throughout the country. But the administration of former President Barack Obama tried to stabilized the traditional group health market by adopting regulations that blocked employers from giving workers cash for coverage.

A 2016 law made a cash-for-coverage HRA program, the qualified small employer HRA (QSEHRA) program, available to small employers.

President Donald Trump listed offering all employers access to cash-for-coverage HRAs as one of the pillars of his efforts to attack the ACA framework. His administration acted on that idea Thursday, by completing work the ICHRA regulations.

The ICHRA regulations will let an employer contribute as much as it wants to employees ICHRA accounts. The employees must use the cash to pay for individual major medical coverage.

Regulators have tried to prevent employers from using ICHRA programs to discriminate older, sicker employees by setting some restrictions on how the programs work. An employer is supposed to offer an ICHRA program either to all employees or to units of a minimize size. Employees are not supposed to be able to choose between having an ICHRA or signing up for traditional group health coverage.

Buckey’s Views

1. Large employers

DirectPath works mainly with large employers.

“I don’t think we’ll see much interest in this from large employers, as the plans they already offer provide them with a competitive advantage,” Buckey says.

2. Small and midsize employers

Buckey says she thinks the ICHRA could be of interest to small and midsize employers that are big enough to face the ACA employee coverage mandate requirements.

But many of those small and midsize employers will probably stick with traditional coverage, once they learn about the compliance and administrative aspects of setting up an HRA, Buckey says.

“Today’s consumers are baffled by health insurance,” Buckey says. “Witness the abysmally low levels of health literacy in the U.S.”

Workers who are used to traditional health plans may prefer to have their employers help them choose their coverage, Buckey says.

Employers that want to make an ICHRA work will have to help the employees shop for coverage based on quality, not just the monthly premiums, Buckey says.

— Read New Final HRA Regs Could Help Brokers Reach Employees, on ThinkAdvisor.

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