Remember those steep group health plan renewals your clients accepted last year? The ones that made everyone wince but felt like the only option? They’re hitting some groups harder than expected. Employers are watching their budgets shrink, and some are even questioning if they can afford to keep offering health benefits.
We don’t expect the pain of traditional group benefits to let up any time soon. We’re hearing that some employers with July renewals are currently facing 25-40% increases on their group plans.
A midyear move to a defined contribution health plan with an Individual Coverage Health Reimbursement Arrangement (ICHRA) can give groups the budget relief they need while still offering strong health benefits.
Helping your clients switch to an ICHRA now could be the key to protecting their budgets, strengthening their benefits for the long term, and helping you retain a client.
ICHRAs Open the Door to Midyear Savings
ICHRAs are a defined contribution approach to health benefits. A major advantage of an ICHRA is that employers can introduce one anytime during the year. Offering one creates a special enrollment period (SEP), allowing employees to buy individual coverage outside the annual enrollment window.
Here’s how ICHRAs work: Instead of offering a traditional group plan, employers determine how much they’ll give each employee each month toward an individual policy of their choice. These contributions are pre-tax for both the employer and employee. What’s even better is that Nexben eliminates the reimbursement process, so the employee never has to front the full premium.
For small employers, defined contribution plans like ICHRAs may be the solution they need to keep offering health benefits. Health benefits are especially critical if the employer needs to recruit and retain talent in an industry with a highly competitive and tight labor market, like healthcare, hospitality, construction, manufacturing, and transportation.
And for applicable large employers (ALEs), ICHRAs give them a new way to stay compliant with the ACA’s employer mandate — in a more cost-controlled and predictable way.
Why a Midyear Switch to ICHRA Makes Sense
- The situation: Hospital administrators became increasingly concerned about the sustainability of their traditional group health plan amid high annual increases.
- The move: To rein costs in, the hospital transitioned midyear from a traditional group plan to an ICHRA, using Nexben’s platform to seamlessly make premium payments to health insurance carriers and employees.
- The results: The community hospital saved more than $2 million — a 60% reduction in annual health insurance premium costs — and gained a more sustainable model for better cost and budget control.
This kind of success isn’t rare. When employers switch to ICHRAs midyear, they can:
- Control costs now:
Instead of waiting for another January renewal, employers can protect their budgets now. Employers set a monthly contribution amount for each employee, and employees use that money to shop for coverage. These defined contribution health benefits result in a controlled budget — without putting employers at the whim of unpredictable and steep group rate renewals hurting so many businesses.
- Free up space in the budget to offer additional benefits:
Employers that switch to an ICHRA may save enough to invest in extra benefits, like dental, vision, or wellness programs. These additional offerings can sweeten a benefits package and provide a powerful tool for retention and recruitment.
- Improve employee choice and satisfaction:
Most employees love the added choice they get from ICHRAs, especially if they’ve seen the quality of their benefits decline as group rates have increased. This was exactly the case with a 59-person manufacturer whose employees and recruits were unsatisfied with its limited group plan options. Switching to an ICHRA resulted in happier employees and stronger hiring and even saved the manufacturer over 30% on health insurance premiums.
While a midyear switch to an ICHRA makes good sense for many groups, one factor to weigh is that employee deductibles will reset. If employees already met part or all of their deductible under the group plan, they’ll start over with their new plan.
Deductible resets are important to consider but aren’t always a deal-breaker. Sometimes, the savings are substantial enough to outweigh this short-term downside. Plus, a midyear transition doesn’t disrupt the January 1 renewal cycle. Employers move to an ICHRA now, operate on a shortened plan year, and renew individual policies next January like normal.
Who’s The Best Fit for a Midyear Switch to ICHRA?
As you scan your book of business to identify strong ICHRA candidates, look for employers who:
- Absorbed a steep renewal during last year’s enrollment period but that you suspect may be struggling to manage it (and who you might be at risk of losing).
- Have a large part-time or seasonal workforce and need better recruitment and retention strategies because they’re facing labor shortages and/or losing employees to competitors who provide health benefits. These employers can even continue to offer a traditional group plan to full-time employees and offer the ICHRA to only certain employee classes, like part-time and seasonal workers.
- Wanted to offer health benefits before but couldn’t make the math work with a traditional group plan.
Once you’ve identified the groups who could benefit most, share with them how easy Nexben’s payment technology makes it to manage the money between the employer, employee, and insurance carriers:
Step 1: Employers set a monthly contribution for each eligible employee class.
Step 2: Employees use their allocated funds to buy coverage from available carriers.
Step 3: The employer receives a simple statement for employee premiums and pays a single invoice.
Step 4: Nexben handles the rest — facilitating payments to each carrier, reconciling individual accounts and providing notifications when updates are needed.
Employers don’t have to feel trapped by their costly group health benefits. They don’t have to wait another year. And they don’t have to sacrifice their ability to offer meaningful health benefits.
A midyear switch to an ICHRA gives your clients the cost control they need — and gives you a way to protect and grow your client relationships.
About Nexben
Nexben is a financial technology company that makes defined contribution health benefits simple, seamless, and powerful. Connect with us to learn how partnering with Nexben can help you deliver smarter, more cost-controlled solutions to your clients.