Key Takeaways:
- Rising costs and increasing complexity make America’s employer-sponsored healthcare system hard to navigate for both employers and employees.
- ICHRAs (Individual Contribution HRAs) offer a modern, flexible way for employers to reimburse employees for insurance and medical expenses.
- Benafica simplifies the switch to ICHRA, handling implementation and administration seamlessly.
America’s complicated relationship with healthcare benefits is deeply tied to the longstanding model of employer-sponsored insurance. A recent Bloomberg editorial, titled “The US Healthcare System is Flawed by Design,” highlights how employer-sponsored insurance is responsible for “inflated costs and a maddening degree of complexity” in an already convoluted system.
The system is broken in two significant ways, Bloomberg argues; it drives up costs for businesses, who must deal with the uncertainty of rising annual costs and complexity that often leaves them needing additional help. For employees, it limits their ability to choose tailored coverage that works for them (and that may be less expensive.)
In this context, Individual Coverage Health Reimbursement Arrangements (ICHRAs) have emerged as a modern, flexible solution to bridge the gaps in America’s flawed healthcare landscape.
How ICHRAs Came to Be
For a long time in America, health insurance has been tied to what your employer offered—that was your option, take it or leave it. Those who didn’t have access to employer-sponsored coverage were often left without… or with plans that didn’t have any minimum coverage standards.
That all changed with the Affordable Care Act (ACA). The ACA did something that was quite revolutionary at the time; it allowed individuals to purchase their own insurance on the open market, breaking the long-standing dependance on employers. It also freed many from staying in jobs solely for the health benefits.
The subsequent changes in the healthcare market since the ACA was passed—especially the adoption of the individual insurance market plan—paved the way for ICHRAs to be formed.
ICHRA’s Leverage the Existing Marketplace… And Allow Flexibility
The concept of reimbursing employees for individual health plans wasn’t entirely new. In 2016, QSEHRAs (Qualified Small Employer Health Reimbursement Arrangements) were introduced in the 21st Century Cures Act, offering small employers a way to contribute something toward employees’ healthcare costs, if traditional group plans were cost prohibitive.
ICHRAs (Individual Coverage Health Reimbursement Arrangements) piggy-backed off this concept of reimbursement, but for employers of any size. In 2018, a US regulatory expansion formally approved ICHRAs. Since then, its adoption has been exponential—and it’s not hard to see why.
Adopting ICHRA is a win-win: employers gain cost control and flexibility that one-size-fits-all group plans don’t offer, while employees enjoy the freedom to choose tailored, portable plans. Both benefit from tax advantages—employers can deduct 100% of reimbursements, and employees receive tax-free funds, helping them stretch their healthcare dollars.
Why Switching to ICHRA is Easier Than You Think
So now you might be wondering, “Wait, how complicated is it to switch all my employee’s group healthcare benefits over to ICHRA?” Don’t worry—it’s simpler than you think!
“At Benafica, we make transitioning from a traditional group health plan to an ICHRA simple and stress-free,” says Benafica CEO Ryan Jewison. “With our expertise and the power of our BENNGI+ platform, employers can confidently offer their teams greater choice and flexibility that brings access to the entire insurance market in a frictionless platform.”
Ready to learn more? Visit our ICHRA page to see how Benafica can help you ease the transition.
Switching to ICHRA is not only simple but also an opportunity to modernize your benefits offerings. With Benafica and BENNGI+ by your side, you’ll make the transition seamlessly empowering employees while cutting costs and saving time.