As group health insurance premiums tick ever upward, firms of all sizes are seeking to lower costs. Consumer driven health (CDH) accounts, the generalized name given to a variety of accounts that allow employers and employees to save and spend some healthcare dollars as they see fit, may be part of your solution. In this three part series, we’ll explore how flexible spending accounts, health reimbursement arrangements and health savings accounts may be paired with group health benefits – and what aspects of each CDH account might be appealing to your employer groups.

Let’s dive in: ICHRAs and QSEHRAs

There are more types of HRAs than these (watch our health insurance terminology video here), but ICHRAs (pronounced ICK-ra) and QSEHRAs (pronounced cue-SAY-ra) are having a moment among small-to-mid-sized employers. Like any HRA, these accounts are fully funded by employers. Employee contributions are not permitted.

Qualified small employer HRAs, made available with the passage of the 21^st Century Cures Act, permit employers with less than 50 employees to reimburse their employees for premiums on individual under 65 policies. Individual contribution HRAs, made available by regulatory changes in 2020, allow employers of any size to reimburse employees for either individual under 65 or Medicare Advantage plans. Both types of HRAs can be used to reimburse other qualifying medical costs.

The case for ICHRAs

ICHRAs permit employers who are subject to Affordable Care Act requirements (e.g. those with 50 or more full-time or equivalent employees) to pay for employee coverage on the Marketplace or through an insurance broker. However, funding within an ICHRA must be sufficient to purchase a plan meeting the ACA’s coverage and affordability standards. When ICHRAs meet these criteria, employees must use the ICHRA, rendering the employee ineligible for a premium tax credit. We should also note that ICHRAs ands traditional group health plans may not be offered to the same employees.

So, what’s in it for employers and agents?

In some cases, Marketplace plans can outperform group health plans on cost while providing comparable benefits. And, since these HRAs are necessarily a defined benefit, employers may realize greater control over their healthcare budgets. Agents though may be wondering about what happens to the group commission payment. There’s a few ways you might approach this.

First, it’s possible for groups to offer traditional benefits to one class of employees and ICHRAs to another. Your local fast food chain might reserve traditional benefits for their corporate staff while offering ICHRAs to hourly employees. When working to partner with hourly employees to select appropriate coverage, you’re expanding your referral potential alongside your under 65 commissions. Seasonal employees might be another class ripe for an ICHRA offering. Alternately, the group might forego traditional benefits altogether. In this case, you’ve got a number of potential under 65 clients to help expand your book. As you continue to develop relationships, it’s possible to retain these folks into their Medicare years.

The case for QSEHRAs

37% of small employers do not offer health benefits – and do not intend to do so – because they find it cost prohibitive.¹ This often puts these employers at a disadvantage when competing for talent. QSEHRAs present an alternative solution.

By setting aside pre-tax dollars to reimburse employees who purchase nongroup coverage, employers give employees an option to choose the individual plan that best meets their needs. As an added bonus, employers with QSEHRAs may qualify to use both the employer’s subsidy and any premium tax credit they may be eligible for.

Yes, we know – establishing a QSEHRA for a group means missing out on that particular group’s commission payment. But, where there’s a problem, there’s an opportunity: agents with prospective or client groups offering QSEHRAs have great potential to build their individual books of business – and retain those clients into their Medicare years.

Market landscape

To be clear, ICHRAs and QSEHRAs aren’t yet widely adopted, but employers are becoming more receptive to the idea. Smaller employers seem to be most interested – 92% of all HRA-based coverage is offered by employers with fewer than 20 people on their payroll. These offerings aren’t in vain, either. The average participation rate for an ICHRA or QSEHRA is 60%, which is on par with industry standards for traditional group plans.²

Final thoughts

Employer-sponsored group benefits, like those offered by our carrier partners, are still a great fit for a majority of employers. However, for smaller employers who find themselves priced out of such benefit, ICHRAs and QSEHRAs provide an alternative worthy of exploration. Agents willing to brainstorm around these solutions with their clients may find these options a better fit for client needs – and have the potential to develop new business relationships.

Not sure if an FSA, HRA or HSA is the best fit for your group? Let’s chat mygroupsupport@actionbenefits.com.

Read more: Part one

Read more: Part two

1. Andrew Cass, “41% of small business have increased prices due to rising health insurance costs,” Becker’s Payer Issues, 2022

2. Stephen Miller, “Employers consider HRA-based alternatives to group health plans,” Society for Human Resource Management, 2022