ICHRA: A New Solution for Employer Health Benefits Coverage Gap

Austin, Texas – Business owners are increasingly exploring new options to provide health benefits to employees as the landscape of employer-provided health insurance benefits continues to evolve. According to a recent nationwide survey conducted by Gravie and Wakefield Research, there is a growing interest in the individual coverage healthcare reimbursement arrangement (ICHRA) as a potential solution.

The survey revealed that 83% of firms with 10 to 199 employees offer health benefits to some of their workers, while only 42% of companies with three to nine workers do so. Additionally, the survey found that in 2018, only 19% of nannies, home health aides, and other domestic workers had employer-provided health insurance benefits, highlighting a significant gap in coverage for certain workers.

The ICHRA model allows employers to make tax-advantaged contributions to employees who enroll in a health plan through the individual marketplace, providing more flexibility and choice for employees in selecting their individual health plan. Since becoming available to employers in January 2020, ICHRAs have seen a surge in adoption among employers, particularly in states where individual plan premiums match or are lower than small group plans.

The survey also identified some barriers holding many employers back from offering ICHRAs, with nearly one in five benefits decision-makers at midsize and large companies expressing concerns about the potential overwhelming nature of ICHRAs. Additionally, the survey found that managing health insurance is one of the most difficult and time-consuming parts of the job for many benefits decision-makers, with over 80% noting multiple administrative barriers preventing them from fully embracing ICHRAs at this time.

Furthermore, the ICHRA market is rapidly changing, with the number of employers adopting ICHRA growing significantly between 2022 and 2023. The report also found rapid growth in larger businesses adopting ICHRA, signifying a shift in the landscape of health benefits solutions for employees.

As more employers explore alternative health benefits solutions like ICHRA in the years ahead, it is important for financial professionals to stay informed and provide sound financial counsel to clients as their needs continue to evolve with the changing market.