What You Need to Know
- Through ICHRAs, employers can give employees cash they can use to buy their own coverage.
- One challenge: The employees will need help with finding, choosing and buying their own coverage.
- Retail advisors who have the right tools could be in a good position to provide that help.
For decades, the vast majority of the American workforce was locked in to group health insurance coverage selected by the employer.
With the advent of health reimbursement accounts — and in particular, the individual coverage health care account in June 2019 — that stranglehold was broken.
HMOs and PPOs still comprise most of employers’ offerings.
Among employers offering one type of plan, two-thirds to three-quarters offer those traditional insurance options, according to the Kaiser Family Foundation’s annual Employer Health Benefits Survey.
However, the category containing HRAs and high-deductible plans started to expand after 2019.
That means there is an opportunity for financial advisors to become more deeply involved in health insurance offerings at employers of all sizes.
Financial advisors already play an important role in managing programs like 401(k) and executive compensation plans. They have proven value and established connections with companies’ leadership and human resources departments.
Most importantly, they already possess the proper alignment, in that health insurance is not health care — it is a financial protection vehicle.
Insurance is not a doctor or a hospital or any treatment; it is financial planning that provides security and a safety net, nor is it access to health care since any consumer can see a doctor without insurance.
What financial advisors lack, though, is expertise in the increasingly complex health insurance space and knowledge of how various ancillary and supplementary insurance products can minimize the financial risk of their clients.
Here are three things financial advisors need to know in order to increase their presence in the distribution of health insurance products:
1. Understand the value to the employee of a multifaceted, strategic approach.
For example, pairing a high-deductible plan with an HSA will lower their fixed costs, providing the employee with a 30% tax break by paying for medical service from the HSA, and then augmenting that coverage with an accident plan to cover first-out-of-pocket cash.
Understanding the financial strategy of combining various insurance products allows advisors to protect the financial risk of their clients.
By understanding a client’s existing needs, future usage and how fixed and variable costs affect their financial planning, financial advisors will best be able to help their clients navigate the effects of health care usage on their personal finances.
2. Understand the value to employers.
ICHRAs allow employers to reimburse employees, separated into specific classes for qualified insurance premiums or insurance premiums and out-of-pocket health care expenses.