ICHRAs Provide Large Employers Cost Savings and Administrative Ease

Individual Coverage Health Reimbursement Arrangements (ICHRAs) have emerged as a strategic alternative for large employers facing challenges in managing escalating health insurance claims and costs. Under federal regulations revised in 2019, employers can now reimburse employees for individual health insurance policies purchased through the state marketplaces, shifting from traditional group insurance models. CGI Business Solutions, a leading employee benefits firm based in New Hampshire, has developed a Private Exchange solution to facilitate this transition and simplify ICHRA implementation for employers and employees alike.

Large employers, defined as those with 51 or more eligible employees, often encounter difficulties with claims-based insurance rating, which drives up premiums after high claims years. ICHRAs mitigate this risk by leveraging age-rated individual market plans, which has enabled some employers to achieve cost savings ranging from 30% to 40%. CGI’s approach further streamlines administrative complexity by offering a unified platform to manage all employee benefits and enabling pre-tax payroll deductions for premiums, avoiding the traditional reimbursement hassle.

Unlike national software-as-a-service (SaaS) ICHRA platforms, CGI’s Private Exchange provides localized, consultative support to guide employers and employees through market options and compliance requirements. This includes managing ICHRA notices, reporting, and regulatory compliance, thus reducing administrative burden. Additionally, CGI’s transparent per employee, per month (PEPM) pricing model is positioned to be more cost-effective than many national competitors, especially those involving brokers with layered fees.

CGI reports growing adoption among diverse sectors, including nonprofit and manufacturing clients, with some clients realizing multimillion-dollar annual savings. Notably, some employers are redirecting savings to enhance employee benefits with coverage for copays and prescriptions, positively influencing workforce morale and perceptions of employer health plans. Despite these benefits, CGI emphasizes that ICHRAs may not suit every employer, advocating for personalized analysis to determine the optimal health care financing strategy, whether fully insured, self-funded, or via ICHRAs.

This trend reflects shifting dynamics in employer-sponsored health benefits amid rising premium costs and claims volatility. ICHRAs offer a flexible, cost-containment alternative aligned with individual market plans, supported by evolving regulatory frameworks. For insurance professionals, understanding the operational, financial, and regulatory implications of ICHRAs is crucial as large employers reconsider traditional group insurance models in favor of more sustainable health benefit strategies.