Despite inherent differences in traditional employer-sponsored group insurance and ICHRAs, moving to an ICHRA doesn’t seem to have a significant impact on overall plan participation.
Individual coverage health reimbursement arrangements—ICHRAs for short—offer an alternative to the traditional employer-sponsored group health plan by allowing employers of any size to reimburse employees’ premium on a pretax basis for health insurance they purchase individually. As an earlier paper authored by Lauren Efferding detailed, enrollment in the individual marketplace continues to grow, with nearly 3 million new enrollees in 2022. Additionally, according to Ideon (formerly Vericred), nearly half of the United States is classified as “ICHRA-friendly,” meaning individual plan premiums are comparable or less expensive than small group plan premiums for plans within the same metallic tier.
As ICHRAs gain traction among employers, we set out to see what conclusions we could draw from our clients electing this type of arrangement. Would the behavior of early adopters help us predict enrollment, provide guidance on when to offer an ICHRA, and establish parameters for a successful rollout, thereby increasing employee satisfaction with benefits? To attempt to answer these questions and others, we analyzed enrollment data from 57 employers representing approximately 4,000 benefits-eligible employees who were under the age of 65.
Our analysis is primarily focused on the employers that sponsored a traditional group health plan in 2021 before adopting an ICHRA for 2022. This consisted of 38 employers representing approximately 3,600 employees. We’ve included a brief section at the end of this paper summarizing our key findings related to the enrollment characteristics of the remaining 19 employers. Overall, our research found that, despite inherent differences in traditional employer-sponsored group insurance and ICHRAs, moving to an ICHRA doesn’t seem to have a significant impact on overall plan participation, as we’ll discuss in detail.
What factors influence employee participation?
Overall, participation in an employer-sponsored health plan remained virtually unchanged after moving to an ICHRA—41% before and after. The demographic profile of the group also remained nearly identical.
Age proved to be a better indicator of participation than other demographic factors we analyzed, such as income and geography, with older individuals more likely to elect coverage, despite age-rated premiums in most states’ individual markets.