How to prune your self funded plan costs: ICHRA
Updated: Aug 12, 2020
Individual Coverage Health Reimbursement Accounts (ICHRA) are a specialized type of HRAs, that allow employers to reimburse, among a variety of medical expenses, individual health insurance premiums (as well as dental, vision and other exempted benefits). The program was made available by legislation on January 1st, 2020. You can read more at gonewedge.com/ICHRA
With the background out of the way, what makes an ICHRA a unique risk-transfer mechanism for the self-funded market, is the ability to offer the ICHRA to specific classes of an employer population.
So let's walk through what this might mean for a 1000 person company with 800 employees enrolled on their major medical plan.
60% of claims cost comes from 2 of 10 locations
At these 2 locations, there are 160 employees enrolled in the plan
The employer would initially save:
Claims cost - variable cost
Stop loss premium - fixed cost
Administration premium - fixed cost
The employer would then spend:
ICHRA contribution - roughly to stop loss premium
ICHRA administration fee - similar to self funded administration premium
The employer would then net save: 60% of claims cost.
So, what could an ICHRA do for a self-funded major medical plan? Save claims cost, give over 90% of employees equal or better coverage, and lower long-term year over year renewal costs.