Employer adoption of specialized accounts that they fund to help reimburse employees when they buy health insurance on their own is surging in 2024.
The number of employers who offer individual coverage health reimbursement accounts (ICHRAs) grew 30% in 2024 from the year prior, expanding a benefit that provides employers another option than purchasing group health plans for their employees, according to a new report by the HRA Council.
Employers fund these accounts with money that employees can use to purchase health insurance, often on Affordable Care Act exchanges.
Uptake has been even larger among employers with 50 or more full-time employees (up 85%). These employers are required to purchase health coverage under the ACA, and offering ICHRAs allows them to satisfy the employer mandate under the law.
Thanks to generous subsidies on the exchanges, the funds that employers contribute are often enough for workers to purchase either Silver- or Gold-level plans, which have the lowest copayments, coinsurance and deductibles.
How ICHRAs work
As mentioned above, employers fund ICHRAs with money that workers can use to help reimburse for the purchase of health insurance, often on an ACA exchange. Excess funds can be used to reimburse them for qualified medical expenses, including copays, coinsurance and deductibles, in addition to medications and some medical equipment.
Funds are deposited into the ICHRA on a monthly basis. These funds are not taxed.
Employers that offered an ICHRA between July 1, 2022 and June 30, 2023 contributed an average $908.80 a month, which was more than enough to purchase the lowest-cost self-only Gold plan on an ACA exchange, according to a report by PeopleKeep, a benefits administration software company.
Some other features of these plans include:
No reimbursement limits.
Firms of any size can offer an ICHRA.
Employers may designate different reimbursement amounts to different types of employees.
Employers can offer both group health plans and an ICHRA concurrently.
Satisfying the employer mandate
ICHRAs can satisfy the ACA employer mandate if they meet the standards the law sets out for group health plans:
Affordability: To be considered affordable, employer-sponsored health insurance or benefits for employees should cost no more than 8.39% of the employee’s household income in 2024, using the lowest-cost Silver plan on the ACA exchange as a standard after accounting for the employer’s ICHRA contributions.
In other words, the lowest-cost Silver plan premium, minus the employer’s ICHRA monthly allowance, must be less than 8.39% of the worker’s household income.
Minimum value: Under the ACA, a health plan meets the minimum value standard if pays at least 60% of the total cost of medical services for a standard population, and its benefits include substantial coverage of physician and inpatient hospital services. Any plan a worker purchases on an ACA exchange will satisfy the employer mandate.
Small-employer option
There is actually a similar plan that is only available to employers with fewer than 50 full-time equivalent workers: the qualified small employer health reimbursement account. QSEHRAs differ from ICHRAs in a number of ways.
They have maximum contribution limits, determined by the IRS each year. For 2024, those limits are $6,150 for each self-only employee and up to $12,450 per employee with a family.
While an ICHRA allows for varying allowance amounts based on many employee classes, QSEHRAs only allow employers to vary reimbursement amounts based on age and family size.
All full-time W-2 employees and their families are automatically eligible for a QSEHRA. Employers may offer plans to part-time employees as well.
Employers can’t offer both group insurance and a QSEHRA to their staff.
The takeaway
While these accounts are growing in use, it’s a risky move to stop offering group health insurance and replace it with an ICHRA. These are new accounts and most workers will be unfamiliar with them.
And considering that health insurance is one of the main benefits that employees look for, offering a reimbursement arrangement may turn some workers off. Give us a call if you have questions.
Diabetes remains a leading chronic condition impacting over 38 million people in the United States — over 11% of the population.1 Due to a myriad of lifestyle, environmental, and genetic factors, the prevalence rate is expected to continue its upward spiral, with more than one million new cases per year through 2030. As the healthcare spotlight continues to shine on diabetes management, self-insured employers will grow increasingly responsible for bearing the financial burden of this complex, chronic, and costly condition.
A Widespread and Growing Concern for Self-insured Employers
While the current prevalence rate is substantial, we can expect numbers to skyrocket in coming years, as one in three Americans are prediabetic and likely to develop type 2 diabetes, in conjunction with other life-threatening diseases such as heart disease and stroke.2 Only 1.7 million out of the 38 million diabetics have type 1, signaling the primary role of obesity in the onset of diabetes.1 Looking at current statistics for obesity, we can predict a corresponding increase in the number of diabetes cases if obesity is left untreated:
Nearly 42% of adults and 20% of children and adolescents are obese.3,4
From 1999-2000 to 2017-2020, the adult obesity rate increased by 37%.5
From 1999-2000 to 2017-2020, youth obesity increased by 42%.5
With the growing number of individuals who need medical management for diabetes, new treatments have quickly emerged to manage blood sugar more effectively and help patients achieve an improved state of health — with the added benefit of significant weight loss.
Emerging Treatments for a Complex Condition
Insulin is the long-standing treatment for an estimated 27% of diabetics, most of whom have type 1.6 However, type 2 diabetics often need additional or alternative treatment. The standard medication therapy typically starts with Metformin, along with diet and exercise modifications. If Metformin alone at optimal dosing is ineffective, Sulfonylureas (Glipizide) or Thiazolidinedione (Pioglitazone) may be added to the treatment protocol. The goal is to reduce Hemoglobin A1c (HbA1c) levels, a standardized metric for blood sugar levels, to below the diabetic range (6.4% and above).
If these initial therapies are in place for at least three months and fail to lower HbA1c below 6.4%, patients can begin taking glucagon-like peptide-1 receptor (GLP-1) agonists, such as Ozempic, Wegovy, or Mounjaro. GLP-1s are used to treat both type 2 diabetes and obesity by slowing the movement of food from the stomach to the small intestine, which reduces appetite and feelings of hunger. GLP-1s can be used with the maximum dose of Metformin when a patient is obese with type 2 diabetes. However, despite its proven efficacy in treating diabetes and obesity, not all GLP-1s are as effective as others and can cause serious side effects, including gastric stasis, pancreatitis, and, in rare cases, thyroid cancer.7
The Role of Financial Incentives in GLP-1 Treatment Trends
Despite the potentially dangerous side effects, GLP-1s have exploded in utilization in recent years, beginning with off-label use for weight loss and now through the FDA-approved Wegovy dosage designed for treating obesity. However, because generic versions of GLP-1s have yet to be approved, manufacturers and pharmacy benefit managers (PBMs) are taking full advantage of the opportunity to boost their margins for these popular brand-name medications.
GLP-1 manufacturers typically offer “Class of Trade” financial incentives, instead of rebates, to PBMs to ensure placement on the PBM’s formulary and to incent the dispensing of GLP-1s from the PBM’s mail-order pharmacy. These class of trade incentives have resulted in minimal clinical oversight required by the PBMs to approve the use of GLP-1s. In most cases, PBMs will give their stamp of approval if there is evidence of past or current treatment with Metformin — without investigating whether HbA1c levels indicate the existence of type 2 diabetes.
PBMs have struck gold with GLP-1s, as the combination of class of trade financial incentives with the highly sought-after weight loss effects has exponentially increased utilization and sales, with projections of over $71 billion by 2032, according to J.P. Morgan.8 However, by placing profit over outcomes, PBMs are to blame for the continual escalation of GLP-1 utilization and prices — without close consideration of if/how these medications will truly impact clinical outcomes.
Containing Costs With Fiduciary Utilization Management
Working in direct opposition to traditional PBMs, a fiduciary utilization management partner operates only in the best interests of the plan sponsor and its enrollees. By focusing on medical necessity and clinical rigor, a fiduciary clinical services program like US-Rx Care’s Right Rx service can generate substantial cost savings without compromising patient outcomes. Compared to the current “open floodgate” PBM model, proper GLP-1 utilization management should lead to a 50% cost reduction that enhances the value and integrity of self-insured pharmacy benefit plans.
Weinger, K., & Beverly, E. A. (2010). Barriers to achieving glycemic targets: who omits insulin and why?. Diabetes care, 33(2), 450–452.
Lisco, G., De Tullio, A., Disoteo, O., Piazzolla, G., Guastamacchia, E., Sabbà, C., De Geronimo, V., Papini, E., & Triggiani, V. (2023). Glucagon-like peptide 1 receptor agonists and thyroid cancer: is it the time to be concerned?. Endocrine connections, 12(11), e230257.
Chronic conditions and overall poor health are a key cost-driver of health care costs, which is hitting the pocketbooks of both individuals and employers.
There are a number of factors that are driving this, including poor lifestyle choices, poor diets, lack of exercise and hereditary issues. But another reason for Americans’ declining overall health is the cost of accessing health care, not keeping up with checkups and vaccinations and having a poor understanding of their health insurance coverage.
Employers are recognizing the effects their employees’ poor health is having on the insurance premiums they and their staff pay, and some are taking it into their own hands to help their workers through various programs that help them better utilize their benefits.
Declining health
Recent research from Arizent, parent company of Employee Benefit News, found that 65% of employers feel their staff are generally healthy, but only 35% of employers with less than 100 workers think the health of their employees has improved over the past few years, which they directly correlate with rising health plan premiums.
The survey also found that 40% of employers have seen an uptick in the use of sick days and medical leave by their staff. This may also be an outgrowth of the COVID-19 pandemic. Since then, managers have generally encouraged staff to stay home if they are ill to avoid spreading the love to other staff members.
“However, increased use of medical leave does hint at more serious health challenges popping up for workers,” the report says. “Moreover, approximately one-third of employers are seeing a rise in disability leave and the overall prevalence of chronic illnesses.”
This suggests that more employees need time off for their health. These may be warning signs of declining health among workers.
Besides taking more sick and leave time off, less healthy workers may also not be as productive, may have greater instances of presenteeism and cause group health premiums to grow.
What employers are doing
Focusing on preventive care — Overall, 89% of employers surveyed are taking steps to control health care costs, with a majority focusing on improving preventive care access. They are incentivizing preventive care in a number of ways, according to the Arizent survey:
39% host vaccination sessions at the office,
32% host educational talks or webinars about preventive care,
31% host disease screenings,
28% provide monetary incentives, and
26% offer paid time off specifically for primary care appointments.
Efforts are bearing fruit for employers that do the above, with 21% of them saying that the health of their staff has improved over the last few years.
Improving health care literacy — Studies have shown that most group health plan enrollees have a poor understanding of their insurance coverage, and how to use it. Many do not understand what deductibles, copays and coinsurance are and how they work.
Choosing the wrong plan can result in significant out-of-pocket layouts for care, which can further suppress a person’s financial ability to pay for it. Other studies have found that more and more Americans are skipping doctor’s appointments and forgoing necessary care due to the costs and their current health care debts.
The report said that if employers want their workers to pick the best care for the best price, they need to ensure their employees are knowledgeable about their coverage and how to choose the group health plan that best fits their health status. That requires that employers educate their workers better about their benefits.
The takeaway
The Arizent study suggests that by helping and encouraging employees to access prevent care and by educating their staff on their benefits, the efforts can pay off in a healthier workforce, and possibly affect premiums.
Employers may need to invest in educational resources and health care navigation tools to help employees better understand the true cost of their plans, beyond what they are paying in premium.
The Biden administration has rolled back regulations that allow Americans to stay on short-term health insurance plans for up to three years while still satisfying the Affordable Care Act’s individual mandate.
The new rules will limit these controversial plans to no more than four months and they require more disclosure on behalf of the insurers and agents that sell these plans to help consumers understand what they are buying.
These plans are not full-fledged health plans; they offer limited scope of coverage that caps insurance for many services, and they are not subject to ACA consumer protection rules that bar discrimination and guarantee coverage regardless of pre-existing conditions.
The ACA originally limited short-term plans to just three months to fill temporary gaps in coverage when someone is transitioning from one source of coverage to another. The Trump administration enacted new regulations that allowed people to stay on a plan for 12 months, with the option to renew for three years.
These plans have gotten a lot of bad press citing horror stories of people finding out their policies were virtually useless, leaving one man more than $43,000 in debt after his plan wouldn’t pay for his treatment after it deemed his cancer a pre-existing condition.
Critics say the plans are deceptively marketed and consumers are duped into buying health insurance that has stripped-down coverage. Proponents say that these plans serve a valuable purpose in helping people transition from one type of coverage to another.
Many people who have purchased these plans thought they were receiving comprehensive coverage but were surprised later when the insurance wouldn’t cover certain procedures or capped coverage.
Some common features of short-term plans are:
They often use health histories to determine who can get coverage.
They often exclude key service categories from covered benefits, such as maternity.
They can decline coverage due to pre-existing conditions.
They may limit or cap coverage both on a per-service or daily rate basis or in the aggregate (like capping total payments during the year at $100,000).
They are not required to cover the 10 essential health benefits that the ACA requires compliant plans to cover at no cost to the enrollee.
What the final rule does
The new regulations only apply to new plans that are launched on or after June 17, the day the final rule takes effect.
New plans that claim to be “short-term” health insurance will be limited to just three months, with renewal for a maximum of four months total, if extended.
Also, the final rule restricts how these plans may be marketed and requires new levels of disclosure. Plans will now be required to provide consumers with a clear disclaimer that explains the limits of what services they cover and how much they cover.
It should be noted that the new rule does not affect fixed indemnity plans like critical illness, which pays a lump sum if someone is diagnosed with a covered illness. Other plans pay a pre-determined amount on a per-period or per-incident basis, regardless of the total charges incurred.
Plans might pay $200 upon hospital admission, for example, or $100 per day while a person is hospitalized to help with out-of-pocket costs.
If you’ve noticed a lot of employees asking for time off for a “mental health day,” you aren’t alone.
A recent study found that the number of mental health leave-of-absence requests has grown by a third since the COVID-19 pandemic. And, data from ComPsych, a provider of employee assistance programs (EAPs), shows that such leave requests have skyrocketed by more than 300% in the past six years.
Roughly seven out of 10 of leave requests for mental health reasons are from women — in part but not entirely because of the burden and added stress of childcare.
Poor mental health is a serious problem in the workplace. Stress, anxiety, depression and substance abuse lead to reduced focus and concentration, increased absenteeism and presenteeism, higher turnover costs, and more dangerous workplace accidents.
If you’re seeing a broad increase in the number of mental health-related absences, it’s a sure sign that something is wrong. It’s time to take action:
1. Destigmatize mental health problems. Create a culture where it’s ok to discuss mental health issues, and to seek help.
2. Establish an EAP. Workers can use this program to get confidential counseling treatment for a variety of issues.
3. Invest in mental health training for managers. Your leaders need training on how to recognize and sensitively deal with workers experiencing mental health problems.
4. Offer flexible work schedules. Many minor issues can be dealt with by allowing employees more control over their time and work-life balance. Working from home, flex hours, job-sharing programs and generous paid-time-off policies can all help employees manage their stressors before they become real mental health problems.
5. Create a less stressful workplace. Work to reduce unrealistic deadlines, spread the workload and maintain adequate staffing levels. Reassign or eliminate “toxic” managers.
6. Address the cost barriers to care. Many employees can’t afford to see a doctor or counselor, even with insurance. Studies show that one in four adults skips needed care or medications due to cost. Consider adding a direct primary care benefit, which allows workers and covered family members unlimited appointments with their primary care physician with no out-of-pocket costs.
7. Offer mental health or sick day leave. Employers nationwide are responding to the employee mental health crisis by expanding their leave programs. In 2024, over 50% of organizations plan to add paid parental leave, paid mental health days and flexible time off programs. Additionally, 49% are adding bereavement leave, and 37% are adding paid caregiver leave as an employee benefit.
The takeaway
Employers have a number of tools they can access to help employees who are dealing with stress and anxiety. Work can also be a cause of stress, so it’s important that your staff should feel comfortable approaching their supervisors or managers if they are having trouble coping.
You can’t prevent all mental health problems. But you can alleviate work stressors and provide support so that small problems don’t metastasize into mental health crises.
A recent study has found that employers who offer health insurance coverage to their staff had an average return on investment (ROI) of 47%, meaning that for every $1 an employer spends, it will receive $1.47 in benefits.
The analysis by Avalare, a wellness plan provider, and commissioned by the U.S. Chamber of Commerce, found that firms with 100 or more workers to whom they offer group health benefits gained from increased productivity, reduced direct medical costs (for self-insured firms), tax benefits and improved retention and recruitment.
The study confirms that offering health coverage does more than meet a basic need for your staff. Here’s how the 47% ROI is generated:
Improved productivity (53% of ROI)
Workplaces where group health benefits are offered have higher productivity thanks to reduced absenteeism and sick days taken, as well as less presenteeism. In addition, workers who maintain their health and have access to a health plan or wellness program when they need one are less sick, and hence more productive at work.
Tax benefits (23% of ROI)
Employers that offer group health benefits receive both federal and state income tax deductions, reducing their overall tax bills.
Reduced direct medical costs (19% of ROI)
Employers who offer group health plans in addition to associated wellness programs, tend to have healthier employee populations and spend less on direct medical costs. The analysis found that this combination of group health and wellness programs boosted overall ROI for employers.
Savings from employee retention (4% of ROI)
Another ROI driver is employee retention thanks to the savings involved in not losing employees to competitors. Providing health insurance reduces staff turnover, lowering how much employers have to spend on recruitment, onboarding and training. Add tens of thousands of dollars if you are paying for a new employee to relocate.
Recruitment costs (0.3% of ROI)
Offering a solid group health plan can also drive down the cost of recruiting as it can positively influence a prospect’s interest in accepting an offer. While the value of recruitment benefits pales in comparison to other benefits, 9% of prospects base their decision to accept an offer on the group health benefits on offer.
The takeaway
While the study focused on health coverage, and to some part wellness programs, employers that go beyond just health insurance by creating and offering a balanced benefit program, have the greatest ROI.
Examples include retirement benefits like 401(k) plans, wellness plans, dental insurance, vision coverage, short- and long-term disability protection, critical illness coverage, accident coverage and employer-funded life insurance.
Before the COVID-19 pandemic, most businesses considered health benefits little more than a cost to be managed. But the value of health benefits is rapidly changing — and employers need to keep up with the changes and new offerings.
.The Avalere study reinforces what many companies know: Employer-provided coverage helps create a stronger workforce and gives businesses valuable benefits to provide to their employees.
We have the expertise to help you transform your health benefits and programs from an expense into an investment that will help both your organization and your staff thrive.
