A new government approved group health plan through which employees may purchase individual health insurance on the open market may have a significant impact in the employee benefits arena.
By Molly Mulebriar
In about 90 days from now, effective January 1, 2020, employers of all sizes will be allowed to establish a new group health plan that will reimburse employee premiums paid to purchase individual health insurance. The term ‘group health insurance‘ has become an oxymoron.
Government officials call this group plan an Individual Coverage Health Reimbursement Account (ICHRA). We call it the Freedom Plan.
As a defined contribution plan, the Freedom Plan allows employers to control costs while providing employees freedom to pick and choose insurance plans that best suits their needs and budgets versus the ‘one size fits all‘ characteristic of group plans.
Highlights include:
► No cap on Freedom Plan (ICHRA) contributions which are entirely employer funded.
► Employees cannot be offered a choice between a regular group health plan and an ICHRA.
► Employers can offer an ICHRA on a class basis. For example, hourly versus salaried employees, full time versus part time, and by geographic areas, etc.
► Employers may increase the ICHRA amount for older workers and for workers with more dependents.
► Employers maintaining a traditional group health plan can stipulate new hires only eligible for an ICHRA.
While the Freedom Plan may not fit the benefit strategies for some employers, it may be attractive to others for a variety of reasons. Elimination of budget busting renewals, the inordinate amount of time normally expended towards employee benefit management, and onerous government mandates (and punishing sanctions) are a few of them.
There are instances where adopting the Freedom Plan makes more sense than others. A self-funded health plan may be facing a terrible renewal with a series of budget busting lasers may find the Freedom Plan an attractive alternative. Large groups, unprotected by guarantee issue mandates as small groups are in Texas, may find it difficult to procure competitive group health coverage, if at all. The Freedom Plan solves this problem and is a logical solution.
With the passage of the ACA, many of the historic distinctions between group and individual plans blurred. Both now share common characteristics important to consumers. For example pre-existing conditions must covered without waiting periods.
However, there remain important distinctions too such as rating basis. While group plans offer composite rating, individual plans do not. In the former case younger members pay more to subsidize older members who in turn pay less than their risk demands. Not so under individual plans.
Individual rates can be more attractive than group rates depending on geographic area, age and sex. For example, a 42 year old male residing in San Antonio can purchase a policy for as little as $297.21 or as much as $397 depending upon the carrier and deductible chosen. The employer contribution would lower that cost to the member. One online source for rates and benefits is www.ehealthinsurance.com .
ICHRA’s has it’s pros and cons. It’s up to you to decide which outweighs the other. It’s your choice.
