Pension & Benefits News Employers express interest in individual coverage HRAs
Monday, November 30, 2020

Employers express interest in individual coverage HRAs

By Pension and Benefits Editorial Staff

Individual coverage health reimbursement arrangements (ICHRAs), a new employer-sponsored health care benefit program for active employees that became available this year, are drawing the attention of U.S. employers, particularly wholesale and retail employers and those in education and the public sector, according to recent research from Willis Towers Watson. The 2020 Health Care Delivery Survey found that 15 percent of employers are planning to offer or considering offering ICHRAs to at least some portion of its employees in 2022 or later.

Background. An IRS rule issued in 2019 allows employers to begin offering ICHRAs this year. With an ICHRA, employees choose where their medical benefit dollars are spent by purchasing individual insurance coverage and then receiving a reimbursement through an employer-sponsored HRA. The survey found growing interest in this new benefit as a way for employers to keep their costs fixed by giving employees the opportunity to manage their own health care benefit choices and spend.

Pandemic slowed adoption. While 15 percent of all employers are considering offering an ICHRA, the survey found that 20 percent of large employers planning to offer or considering offering ICHRAs to at least some portion of their active employees. In a further sign of support for ICHRAs, a forthcoming Willis Towers Watson survey of chief financial officers found one-third are considering ICHRAs for some portion of their active employees.

“Not surprisingly, relatively few employers adopted ICHRAs this year, as the pandemic diverted much of their attention to other critical benefit matters,” said John Barkett, senior director of policy affairs, benefits delivery and administration at Willis Towers Watson. “However, we expect to see interest grow as companies learn more about ICHRAs and the market for individual health plans continues to grow more robust each year. ICHRAs may be a preferred option for companies considering offering health care benefits through a defined contribution approach personalized to each employee.”

The survey found 29 percent public sector and education employers and 22 percent of wholesale and retail employers are planning to offer or considering offering ICHRAs in 2022 or later. These sectors may be among the early adopters of this new benefit option, which affords employers greater ability to control costs and provides employees with more health benefit options than their employers offer today.

“ICHRAs may align well with employers rethinking their overall approach to benefits, especially in certain industries that have struggled with the challenge of providing competitive benefits that meet the diverse needs of their workforces under ever-increasing budget pressures. And as more employers adopt the ICHRA approach, employees could find relief from the burden of having to change plans whenever they change jobs,” said Barkett.


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