Short answer: An ICHRA tends to fit an employer facing steep group renewals, one offering health benefits for the first time, or one with employees spread across several states or markets. It fits poorly where the individual plans in employees’ counties do not include the doctors and drugs they need, or where the employer really wants to keep its group plan for the same employees.
Signs of a good fit (CMS lists most of these as reasons employers look at a CHOICE Arrangement):
- Group premiums have climbed sharply year over year.
- The employer is offering a health benefit for the first time and wants a fixed budget.
- Employees live in several states or rating areas, which is hard to serve with one group plan.
- Some employees are on Medicare Parts A and B or Medicare Advantage, which can be reimbursed.
Signs of a poor fit:
- The individual plans available where employees live have networks, hospitals or formularies they will not accept. Quote by each employee’s county and age, not a statewide average.
- Many employees are covered only through a spouse’s employer plan; that coverage does not qualify.
- The employer wants the same employees to choose between the group plan and the ICHRA (CHOICE Arrangement). That choice is not allowed.
- The goal is to keep the group plan and help with deductibles. An integrated HRA or MERP does that job.
- Lower-income employees would lose a Marketplace premium tax credit worth more than the allowance.
In Texas, also get the carrier’s current position on individual policies reimbursed by an employer; TDI Bulletin B-0028-06 (2006) addressed how such policies are classified under Insurance Code Chapter 1501.