By Brad O’Neill – The Wizard of ICHRA & Choice Benefits
I think the ICHRA industry has a math problem. A 100-life employer spends $1,000,000 annually on health insurance. An ICHRA analysis shows 15% savings, or $150,000 per year.
Sounds great.
Then the costs start showing up.
• ICHRA Administration: $40 PEPM = $48,000
• Broker Compensation: $30 PEPM = $36,000
• Platform Fees: $6,000
Now the projected savings are down to $60,000. But we’re still not done.
Most ICHRA vendors don’t include ERISA wrap documents, COBRA administration, ACA reporting, or PCORI compliance. Those services can add another $4-$8 PEPM, or roughly $5,000-$10,000 annually.
Then there’s the cost of moving.
Employee education, plan shopping, HR time, leadership attention, provider disruptions, and change management all have a cost. Even a conservative 3-5% transition cost represents another $30,000-$50,000.
Suddenly that original $150,000 savings looks more like $0-$25,000. And that’s before increasing allowances to improve employee adoption.
This is the breaking point of ICHRA. Not when the individual market stops working. When too many parties are getting paid from the same pool of savings.
Brokers deserve to get paid. Administrators deserve to get paid. Technology vendors deserve to get paid.
But if one administrator rate increase or one additional vendor fee can eliminate the remaining savings, the economics become fragile.
The next phase of ICHRA won’t be won by the companies showing the biggest savings projections.
It will be won by the companies that preserve those savings after accounting for every fee, compliance requirement, and transition cost.
Learn about ICHRA from an independent resource at www.ichra.shop
