ICHRA pros and cons: an honest look

An ICHRA solves some problems with traditional group insurance very well, and introduces a few of its own. Here are both sides.

The advantages

For employers

• You control the cost. Your contribution is a number you set, not a renewal you're handed.
• No participation or contribution minimums. Small teams and teams with many already-covered employees can offer benefits.
• Flexibility by class. Different amounts for full-time and part-time staff, or for different locations.
• Any size. It works the same for a team of three and a company of thousands, and you can grow into it.
• Tax advantages. Contributions are generally deductible and reimbursements generally tax-free to employees.

For employees

• Choice. They pick the plan, network and price point that fits them.
• Their own doctors, where the individual market offers them.
• Portability. The policy is theirs to keep, at their own cost, if they leave.

The disadvantages — and what helps

The individual market varies by area

In some counties only one or two insurers sell individual plans, and networks can be narrower than group plans, with more HMOs and EPOs.

What helps: check real plans for your employees' ZIP codes before committing. Where options are thin, a group plan for that class may be better.

Owners usually can't participate

Sole proprietors, partners and more-than-2% S corporation shareholders generally can't use the ICHRA themselves.

What helps: owners typically buy their own individual coverage, and self-employed owners may be able to deduct those premiums separately. Ask your accountant.

It interacts with Marketplace subsidies

If the offer is affordable for an employee, they lose access to a premium tax credit — which can leave some lower-income employees worse off than a subsidy would.

What helps: check before you set amounts. Employees with an unaffordable offer can opt out and keep the tax credit instead.

Employees have to choose

Some people find shopping for insurance stressful, and a bad choice is a real cost to them.

What helps: enrollment support that shows each person what they'd actually pay and which plans include their doctors. That's built into Rikor.

There's compliance work

An ICHRA is a formal group health plan: plan documents, a 90-day notice, coverage verification, an annual opt-out and records.

What helps: an administrator. Rikor generates the documents, sends the notice and tracks coverage — see the full list of requirements.