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One of the best things employers can do for their employees this Labor Day might be that they can do it themselves: get their own health insurance.
In an “everything old is new” twist, the next health insurance trend may be one that has been around for decades. In a “defined contribution” plan, employees pay for their health with funds provided by their employer, rather than joining a “defined benefit” plan, which is a health insurance plan with a set set of benefits chosen by their employer. You can buy insurance.
A decade ago, experts predicted that rising healthcare costs and new health insurance market options would finally usher in an era of distinct contributions in healthcare. Others argued that the time had come for defined contributions in health insurance.
Widespread adoption of defined benefit plans despite their obvious benefits, such as the opportunity for employees to obtain a plan that meets their specific needs and the opportunity for employers to reduce the financial burden of rising health insurance premiums It did not come to pass.
eHealth (NASDAQ: EHTH), a private online health insurance marketplace, wants to change that this time. The company announced last week that it offers an Individual Health Insurance Reimbursement Arrangement (ICHRA) product in addition to traditional health insurance plans.
ICHRA is a relatively new form of defined contribution plan that allows companies to set up fixed financial contributions that employees use to pay for health insurance. The employee selects and purchases an eligible health insurance plan on their own, and the employer (or its third-party administrator) reimburses the employee for the approved amount. These funds are tax-free for eligible expenses such as monthly premiums and co-payments.
While companies of all sizes can offer ICHRA, it is particularly attractive to smaller companies that want to provide health benefits but cannot afford to do so. Especially in a tight labor market amid mass resignations, ICHRA may help employers acquire workers in a financially manageable and predictable manner.
ICHRA has no employer contribution cap and most employers allow all employees to participate in an ICHRA plan, including part-time workers who may not be eligible for traditional health insurance. Staff who have not completed the waiting period for benefit eligibility can also participate in the ICHRA plan.
For employees, ICHRA is a new way to help pay for health insurance, making health insurance more accessible and reducing financial burdens and concerns about medical costs. In addition, ICHRA enables employee mobility. Rather than being tied to a particular company for health reasons (a phenomenon known as job lock), employees can keep their plans even when they leave their employer.
According to Anthony Lopez, general manager of eHealth’s Individual, Family and Small Business Plans, those who benefit most from ICHRA are full-time and part-time workers who would otherwise not be able to help pay for their health insurance. is an employee of But he says there are also broader benefits that any employee would appreciate.
“If you have ever had a traditional employer-sponsored health plan, you will remember being able to choose between one, two, or even three plan options. Everyone is different, so this can be limiting,” said Lopez. “ICHRA typically allows you to choose from a wider range of options, find the one that best suits your needs and budget, and get help from your employer to reduce your monthly premiums.”
Certain federal regulations governing ICHRA became effective in August 2019 for health plan years beginning on or after January 1, 2020. But according to Lopez, ICHRA is just getting started.
“It took some time for coordination between the financial and insurance sides of the program to grow,” he said.
According to government estimates from June 2019 (when the ICHRA final rule was published), as many as 800,000 employers could eventually offer these options, resulting in 11 million workers and their May benefit the family. The government also estimates that her 800,000 people who were previously uninsured could gain access to health insurance as a result.
It’s too early to know how accurate these forecasts will be, but Lopez sees significant growth potential going forward.
“Other than ICHRA was not widely known, there are no barriers to wider adoption,” says Lopez.
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