Large employers are increasingly funding the purchase of Obamacare plans for their employees during the open enrollment period rather than providing more expensive group health plans, taking an example from smaller companies that have already utilized this option.
According to the nonprofit group HRA Council, the number of employees offering individual health reimbursement plans increased 171% from 2022 to 2023, and the number of employers with at least 50 full-time employees offering such plans increased 144%.
ICHRAs are tax-free accounts that employers use to reimburse employees for health plans that comply with the Affordable Care Act. Employees can use employer-provided funds to choose individual plans on the ACA exchanges rather than enroll in the more limited number of group health plans that employers typically offer. With fully-insured group plans, employers pay the insurer for company-wide plans.
Such arrangements began in 2020 under the Trump administration's executive order and have largely been used by companies with fewer than 50 employees that choose to provide health insurance options to employees, although the ACA does not require such small companies to do so.
But with inflation-driven health care costs rising rapidly for both employees and employers, some large companies required to comply with the ACA are utilizing reimbursement plans.
'Priced Out'
Coury Hospitality, a boutique hotel and restaurant headquartered in the Dallas-Fort Worth area that employs about 1,300 people, switched to ICHRA coverage in 2023 because premiums for its fully insured group health plan would have risen 20 percent after a 30 percent increase the previous year, says Kim Dunbar, vice president of human resources.
"It was just unbearable," Dunbar says. "We were forced out of the group insurance market."
"Every year we were faced with saying, 'OK, how do we raise the deductible?' or make other changes to the plan to contain price increases," she said.
Dunbar said switching to ICHRA-based coverage resulted in the company paying $1.1 million less in premiums in 2023, saving it 60 percent and its approximately 270 employees 40 percent over the previous year.
In the markets where the company operates, mostly in the Midwest and southern states, between 100 and 145 health plans with different carriers, plan types and premium costs are available, she said, far more than were available in group plans.
Some employees have been able to afford health insurance for the first time, Dunbar said. She said a 30-year employee has plan options that can range from $300 to $700 a month, and many employees have waived insurance premiums altogether by receiving a company benefit.
According to recent studies, health care costs in the U.S. could rise 8.5% in 2024. According to Dunbar, Coury's costs are only increasing by 3.5%.
Greater awareness
Eric Wissig, chief operating officer of SureCo, an ICHRA technology administrator based in Santa Ana, California, says the average size of companies utilizing reimbursement arrangements is growing due to greater awareness of these plans.
Employers, brokers and advisors "are realizing that ICHRA is not just for very small companies, and there is an opportunity for larger companies to benefit from implementing an ICHRA program," Wissig says.
KR Management Development, which operates 14 senior care facilities in Florida and employs about 2,000 people, began its second open enrollment offering of ICHRA plans Nov. 13.
According to Heather McCamey, vice president of human resources, the company has seen a 25 percent increase in group plan costs two years in a row and saved 19 percent on premiums in 2023. In 2024, ICHRA plans will see a 6 percent increase in costs, but the company will spend 21 percent more because it contributes a larger share of premiums for the roughly 300 people in its plan.
"We were offering fewer and fewer benefits, and it was getting more and more expensive," says McCamey. "We had to drop benefits and refine the plan to keep costs reasonable for employees and the employer."
McCamey said ICHRAs allow employees to select plans that meet the needs of younger, healthier workers, as well as people over 65 who may receive employer-provided benefits that can be used to purchase additional Medicare plans.
Moving into the middle market
Jack Hooper, CEO and founder of Take Command Health, a Dallas-based health insurance technology company, says he has seen ICHRAs spread over the past year to mid-sized companies with about 50 to 500 employees.
Cost-control methods that have worked in the past are becoming less and less attractive, Hooper said. "In the last few years, you've seen all these efforts to impose equal-funding plans on smaller and smaller groups," he said.
Equal-funding plans are a type of self-funded plan in which employers make steady monthly payments combined with stop-loss insurance to cover large claims. It's "a ticking time bomb until someone gets a big claim, and now all of a sudden they're on the hook for these big bills, and their [premium] renewal is down to 60 percent," Hooper said.
ICHRAs have received bipartisan support, with some Democrats saying they offer more robust coverage than traditional small-group plans, under which employees typically pay higher premiums and cost-sharing than in large-group plans.
But critics worry that low-income workers won't get enough money in their ICHRA accounts to afford to buy qualified health plans on the exchanges. A 2020 paper by the United Hospital Fund, a nonprofit organization dedicated to improving health care in New York City, said ICHRAs carry "significant risks" for low-income enrollees who could lose eligibility for subsidies on the Obamacare exchanges if employer funding levels meet the ACA's minimum and affordable coverage requirement.
There have also been concerns that employers may move older employees into the exchanges, which could increase the cost of ACA plans. However, the HRA Council argues that age and health discrimination is prohibited by the ACA, and many ICHRA participants are relatively young.
Step forward
Insurance premiums in the small-group market are often in the double digits in 2024, according to Noah Lang, CEO and co-founder of San Francisco-based Stride Health, which works with "gig economy" companies such as Amazon.com Inc, Uber Technologies Inc. and DoorDash Inc. and provides their employees with benefits.
Stride Health is a web broker for the Affordable Care Act and enrolls plan participants directly through its platform. In the week before the ACA 2024 open enrollment period began Nov. 1, ICHRA enrollment doubled from a year ago, Lang said.
Companies with fewer than 50 employees continue to dominate the ICHRA market, accounting for 94% in 2023, according to HRA Board data.
Bin There Dump That, a Tri-State trash removal franchise company that operates in parts of Pennsylvania, Ohio and West Virginia, will offer health insurance to its 30 employees for the first time in 2024 under ICHRA plans, owner Bruce Kozak said.
The company decided to offer health insurance "because we had people we could have hired, but they chose not to come with us because we didn't have it," Kozak said. "We knew we needed to step up."