The ICHRA Alternative to Traditional Group Plans: Simplified Individual Coverage HRAs

Helping employer groups offer compliant, flexible, and affordable healthcare benefits to employees. 

THE PROBLEM: The Cons of Traditional Group Plans

Faced with rising premiums, limited flexibility, and unpredictability, brokers and employers have been left searching for more affordable benefits solutions. Some are figuring out how to manage costs by investing in wellness programs, engaging in high-performance network design, or helping employees with chronic conditions to effectively mitigate costs. However, some would rather stick to a traditional group insurance plan.

The “one size fits all” approach of group insurance plans often lacks the flexibility needed to accommodate diverse employee needs, leading to dissatisfaction, and increased administrative burdens.

THE SOLUTION: Introducing ICHRA

ICHRAs (Individual Coverage Health Reimbursement Arrangements) present a transformative solution by allowing employers to offer affordable, compliant healthcare coverage tailored to individual needs. ICHRAs allow employers to give taxfree reimbursements for premiums to employees who enroll in health insurance through the individual marketplace. Created to help control costs through the Inflation Reduction Act and address Affordable Care Act (ACA) compliance, ICHRAs became available as of January 2020.

Employers of any size can offer an ICHRA if they have one employee who isn’t a self-employed owner or the spouse of a self-employed owner. Similar to how the 401(k) was introduced as an alternative to pensions, ICHRAs shift the paradigm from “defined benefit” to “defined contribution”. This approach allows employers to establish a more affordable, predictable annual healthcare budget and provides employees with the portability and flexibility they desire, significantly reducing administrative complexities for employer groups.

Given ICHRA’s flexibility over group health insurance plans, adoption grew nearly 350% by employers of all sizes in the first two years. Now in their fifth year, ICHRAs have experienced nearly 30% year-over-year growth from 2023 to 2024, with Applicable Large Employers (ALEs) as the fastest growing cohort.

The ECHO Solution

While ICHRAs have been well-received and there is significant focus on their design and enrollment, the accompanying administrative burden can pose a challenge. Employers must pay every individual employee’s premium monthly while maintaining a tax-free status. Employers, particularly small businesses, find this cumbersome and time-consuming. Without a streamlined process for paying premiums and handling reimbursements, an ICHRA plan may be unmanageable for an employer.

Electronic payment automation alleviates this by eliminating the inefficient reimbursement process, allowing employers, brokers, and administrators to effectively offer and manage an ICHRA. With ICHRA adoption on the rise, the cost and flexibility make ICHRAs desirable for employees and employers. Payment automation makes these valuable benefits a reality and helps any ICHRA work like a traditional health benefits plan. Premium Payment Manager easily integrates with an existing ICHRA administrative platform to automate payments, delivering a comprehensive and easy-to-use solution for reimbursement management, compliance, and reporting.

Download the full solutions brief below.