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.
The Equal Employment Opportunity Commission has published a final rule that will give new protections akin to disability accommodation under the Americans with Disabilities Act to pregnant workers and those who have recently given birth.
The rule, which takes effect June 18, will require employers to make reasonable accommodations for employees or applicants with known limitations related to pregnancy, childbirth or related medical conditions.
The new regulations apply to employers with 15 or more workers on their payroll. This is a significant new labor law and another source of potential lawsuits for employers.
Who is covered
Essentially, the Pregnant Workers Fairness Act (PWFA) requires employers to make reasonable accommodations for these workers if they ask for it, particularly if they are temporarily unable to perform one or more essential functions of their job due to issues related to their pregnancy or recent childbirth.
Reasonable is defined as not creating an undue hardship on the employer. Temporary is defined as lasting for a limited time, and a condition that may extend beyond “the near future.” With most pregnancies lasting 40 weeks, that time frame would be considered “the near future.”
What’s required
Like what is required by the ADA, if an employee asks for special accommodation due to a covered issue under the PWFA, the employer is required to enter into an interactive process with the worker to identify ways to accommodate her.
The law requires employers to accommodate job applicants’ and employees’ “physical or mental condition related to, affected by, or arising out of pregnancy, childbirth, or related medical conditions.”
The condition does not need to meet the ADA’s definition of disability and the condition can be temporary, “modest, minor and/or episodic.”
The PWFA covers a wide range of issues beyond just a current pregnancy, including:
Past and potential pregnancies,
Lactation,
Contraception use,
Menstruation,
Infertility and fertility treatments,
Miscarriage,
Stillbirth, and
Abortion.
What’s a ‘reasonable accommodation’
The law’s definition of reasonable accommodation is similar to that of the ADA. The regulation lays out four “predictable assessments,” which would not be an undue hardship in “virtually all cases”. These would allow an employee to:
Carry or keep water nearby and drink, as needed;
Take additional restroom breaks, as needed;
Sit if the work requires standing, or stand if it requires sitting, as needed; and
Take breaks to eat and drink, as needed.
Employer rights
As mentioned, an employer may reject an accommodation if it would create an undue hardship, which is defined as a significant difficulty or expense.
Employers may ask for documentation under the PWFA if it is reasonable and the employer needs it to determine whether the employee or applicant has a covered condition and has asked for accommodation due to limitations the condition causes her.
If the worker is obviously pregnant, the employer may not require documentation.
The takeaway
Employers with 15 or more workers will need to add mentions of the new rule in their employee handbooks and train managers and supervisors about it, in order to keep from running afoul of the PWFA.
The ramping up period is short and it’s important that you have in place policies that require supervisors and managers to notify human resources if a worker asks for special accommodations.
The Department of Labor on April 29 issued a final rule rescinding Trump-era regulations that expanded the number and types of employers that could band together to create association health plans to cover their employees.
The 2018 regulations, which have been in legal limbo since 2019, also allowed these association health plans avoid many consumer-protection elements of the Affordable Care Act, which critics said would open the door to participating employers offering insufficient coverage.
The DOL said it needed to rescind the law due to concerns about the potential for fraud and mismanagement in association plans. It said that the new rules limit these plans to “true employee benefit plans” that are the result of a “genuine employment relationship” and not an effort to skirt consumer protections built into the ACA.
Once the final rule takes effect in late May, employers that want to create an association plan will have to comply with much stricter rules that narrowly define these plans and limit the instances under which they can be formed.
Background
Prior to 2018, groups or associations that could meet the three criteria below would be considered a single group health plan, which in turn would determine whether they must comply with small-group market or large-group market rules under the ACA:
Business purpose standard — Whether the group or association has a business or organizational purpose and function that is unrelated to providing health insurance benefits.
Commonality standard — Whether the employers share a commonality of interest and genuine organizational relationship unrelated to the provision of benefits. For example, a trade group for auto shops could qualify since all of the members have a common interest.
Control standard — Whether the employers participating in the benefit program exercise control over the program, both in form and in substance.
Trump rules never took off
The Trump-era rules turned the earlier regulations on their head, particularly the first two standards:
Business purpose: Under the 2018 rule, a group of employers could have formed bona fide associations that had as their primary purpose the provision of health coverage.
Commonality: The 2018 rule would have let associations meet the commonality standard solely through the geographic proximity of its members, such as being located within the same state or city, without having any other common interests.
The 2018 rule also eliminated requirements that these plans comply with essential patient-protection elements of the ACA.
In 2019, the U.S. District Court for the District of Columbia held that a large portion of the rule was based on an unreasonable interpretation of the Employee Retirement Income Security Act and inconsistent with “congressional intent.” It later stayed action on the case and ordered the DOL to reassess its rulemaking.
After that, White House administrations changed and the department last year proposed the rule that was finalized April 29.
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 50% lower cost while enhancing the value and integrity of self-insured pharmacy benefits.
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.
