How Much Does ICHRA Save the Average Full-Time Employee? - Zupnick Associates

(By: Brittany Brooks)

ICHRA saves the average full time employee more money than traditional health insurance and the policy is able to satisfy a variety of employees’ needs and be cost effective. As the health industry continues to shift to a consumer-driven market, more employees are demanding health coverage that adheres to what matters most to them without emptying their wallets.

There’s a chance we might see more companies adopting ICHRA as an employee benefit for their full-time employees because ICHRAs have the ability to meet those demands. 

How ICHRA saves the average full-time employee

Generally, when an employee opts in for health coverage, a portion of the insurance premium is deducted from the employee’s check and the employer pays the remaining balance directly to the insurance carrier. 

The employee is responsible for copays, prescription costs, and any other medical expenses that may arise. The employee can use an HRA to cover some of the extra costs, if the expenses are eligible, otherwise, they’ll have to pay out of pocket.

Here’s where ICHRAs have the potential to save full-time employees money. Since only the employer contributes to the arrangement, there isn’t a deduction, automatically increasing the employee’s take-home pay.

Depending on the size of your contribution each month, the ICHRA may reimburse the employee for the entire health coverage premium. Verses a traditional insurance plan, whatever amount is deducted will not be reimbursed.

Unlike an HRA, an ICHRA allows employees to purchase their own health coverage plans on the marketplace or outside of the exchange. If you allow it into the policy and there’s still some room in the allowance, employees can submit a claim for other medical costs:

  • Vision & dental insurance
  • Deductible (can not use HSA for the deductible if ICHRA is used)
  • Copayments
  • And other eligible medical expenses

Good to know: If an employee decides to leave the company they won’t lose their health insurance since it’s not provided directly by the employer.

 

Important: Can not offer employees within the same class the choice between a group health plan and an ICHRA.

 

How ICHRA saves you money

All employer contributions for this employee benefit are not counted as taxable income making them 100% tax-free. There is no obligation to contribute a minimum or maximum amount either.

On average, the Kaiser Family Foundation found that employers pay at least 79% of the health insurance premium for their employees. In 2017, employers paid $4,953 per employee for their portion of the insurance premium while employees paid $1,415. By 2020, it ballooned to $5,617 for employers and $1,532 for employees in just three short years. 

 

Traditional Insurance Contribution By Year

Year

Employee Contribution

Employer Contribution

Total Premium Costs For The Year

2016

$1325

$4,776

$6,101

2017

$1,415

$4,953

$6,368

2018

$1,427

$5,288

$6,715

2019

$1,489

$5,483

$6, 972

2020

$1,532

$5,617

$7,149

(Kaiser Family Foundation)

With these increases, both you and the employee would pay more each year. ICHRA empowers you and your employees to avoid the ever-increasing costs of group health policies and traditional health coverage. 

ICHRAs give employees a chance to dodge expensive health plans by allowing them to take advantage of medical coverage offered on the Affordable Care Act’s health insurance marketplace.

As an employer, offering ICHRAs to your full-time employees gives you more flexibility and control. ICHRAs are more predictable than traditional health insurance, so you know exactly what you’re contributing for the entire year without guessing or sudden surprises.

Your company decides what the policy will be if there’s a remaining balance left in the account. You can choose to roll it over to the next year for the employee or the leftover funds can be sent back to the company.

Important: Employees can not use ICHRA funds and still utilize tax discounts on health care premiums in the marketplace.

 

Deciding which employee benefits are best for your company and your employees can be daunting, especially when it comes to health coverage. Group plans, FSAs, HRAs, ICHRAs and so much more come flying at you, and you may not know which ones are actually beneficial for your organization and workers.

For professional guidance and a helping hand, don’t hesitate to reach out to Zupnick & Associates for a consultation on ICHRAs and other employee benefits.

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