ICHRA Adoption Grows Nearly 30% in 2024

A recent report from Remodel Health has shown that the adoption of individual coverage health reimbursement arrangements (ICHRA) by U.S. employers rose by 29% between 2023 and 2024.

The 2024 report revealed a steady adoption of ICHRAs across various industries, encompassing both small employers and applicable large employers (ALEs). Unlike smaller companies, ALEs are subject to the large employer mandate, which requires them to provide health benefits to their employees. Additionally, the report indicated that organizations in almost every state have embraced ICHRAs.

ICHRAs enable organizations to provide employees with a monthly tax-free allowance to purchase healthcare services tailored to their specific needs. These arrangements assist in managing costs while adhering to Affordable Care Act regulations. Consequently, the adoption of ICHRAs is on the rise as more plan sponsors explore methods to manage expenses related to health benefits and provide personalized healthcare options for their employees.

An employer has the flexibility to structure an Individual Coverage Health Reimbursement Arrangement (ICHRA) in various ways. This includes options to reimburse all medical care expenses, limit reimbursements solely to premiums, restrict reimbursements to nonpremium medical care expenses (such as cost-sharing), or specify certain medical care expenses that are eligible for reimbursement. While not mandatory, many employers primarily utilize ICHRAs to reimburse premiums for individual health insurance or Medicare, which encompasses Medicare Parts A, B, C, and D, along with Medigap policy premiums. Additionally, ICHRAs enable businesses to set eligibility criteria based on employee classifications, such as full-time, part-time, and seasonal workers, which can be advantageous for employers with diverse employee groups.

It’s important to note that ICHRAs do have limitations; for instance, employers cannot offer employees the option to choose between an ICHRA and a traditional group health plan.

Employers should keep a close eye on trends to make informed decisions regarding employee benefits tailored to their organizations and workforce.