ICHRAs and Quotes: What you need to know

When most of us shop for something, there are a series of questions we ask ourselves:

  • Is this a want or need?
  • Do I ‘need’ this right now?
  • Where do I go to get it?
  • What item will best fit my need or want?
  • How much does it cost?
  • Can I afford it?
  • How am I going to pay for it?

It doesn’t matter if it’s a loaf of bread, an air conditioner, or a new house, we run through some list of similar questions. How we answer these questions helps us decide whether we continue with our purchase and defines how and what we will buy.

The same is true for health benefits. Whether you are an individual seeking benefits, or an employer preparing to offer benefits, these questions need to be asked to determine what benefits fit your needs and whether or not they are within your budget. This process typically includes a broker assessing your needs and preparing quotes for your options. For an employer, this is vital to determining what benefit plan(s) you will offer your employees during open enrollment. This process is especially important to complete each year because rates offered by health insurance carriers change.

But, what if there were a solution that allows the employer to forgo getting quotes and allows the employer to set their employee benefits budget without needing quotes? There is! That solution is an ICHRA.

With an ICHRA, a company sets aside a specific dollar amount per employee per month. This is called employer contribution. Employees can use this contribution to purchase individual health insurance that best fits their needs.

As an employer, you no longer need to run through the series of questions and get quotes on traditional group benefits. You no longer need to worry about picking a single group plan that fits the needs of most, but not all, of your employees. As the employer, you can determine what contribution amount fits into your budget, and in certain cases, depending on the employee’s plan selection, the employer’s contribution may cover the full monthly premium amount.  If the monthly premiums are greater than the contribution, then with Nexben’s ICHRA the employee may cover the remainder via payroll deduction.

So, this revolutionary way of offering benefits means you no longer need to get a quote before open enrollment. Instead, you get to determine your contribution strategy. Looking at what you can afford and what contribution amount will be of the greatest value to your employees. Leaving the benefits selection up to each individual employee, providing them with the freedom of choice!

This means you no longer have to ask your broker, “How much will an ICHRA cost us?” Because with an ICHRA, your broker will answer that question with, “Well, how much do you want it to cost?”

Instead, you may ask, “How do I know if the contribution amount offered is enough?”

The answer to this is located in our recent post, “IRS Releases New Affordability Rate of 9.12% for 2023”. This calculation will give you the minimum amount to contribute to avoid penalties from the federal government.

The follow-up question: “I know what the company is contributing and that it meets the federal minimum guidelines. How do I know how much the employees are going to pay?”

In order to answer that question, Nexben has developed a quoting tool that will give you an idea of what employees may pay after the employer contribution is applied. This tool only gives an approximation because there are certain generalizations used to create the report. For example, the location of each employee is set to the location of the company. To run the report, a broker needs the census of the group and makes some policy choices. The report will then show what each employee would pay for each policy.

For more information on quoting a Nexben ICHRA, please view a recording of our webinar on that subject.