Deciding Wiser: Is an ICHRA Health Plan Right for Your Business Model?
It's a good time to cast aside several misconceptions about what's new in healthcare coverage options. The truth is plans like Individual Coverage Health Reimbursement Arrangements (ICHRAs) are quickly becoming a real game-changer in the marketplace.
In today's fast-paced, consumer-driven economy, the level of competition is arguably the highest that it's ever been. Whether it's for resources, clients, or retaining top talent, companies of all sizes want to stay ahead of the business curve.
One area that's consistently evolving is the health benefits landscape. In recent years, newer, more creative options like an Individual Coverage Health Reimbursement Arrangement (ICHRA) have emerged to offer fresh solutions, particularly for small businesses contending with tight budgets. After all, ICHRAs allow employers to control costs, provide attractive tax incentives, and afford flexible coverage choices for today's increasingly diverse workforce.
The trouble is that what's new is oftentimes misunderstood. In this article, we'll seek to dispel some of the common myths surrounding the ICHRA experience and provide some key insights from HRA provider, Take Command Health, on how you can make these benefits offerings work for you and your employees.
5 common ICHRA myths explained
"We know that health insurance is one of workers' most sought-after benefits," says Andy Lange, vice president of people at Take Command. "ICHRA can be huge for a business that wants to step up its recruitment and retention, especially small businesses."
With that in mind, here are some common misconceptions about ICHRAs that business owners should be aware of – before they rule out this newer benefit option:
1. The marketplace has challenges that may limit ICHRA's effectiveness.
"Businesses may assume that healthcare marketplace plans are either too expensive or fail to meet the benefits levels of prior traditional group health plans," explains Kyle Estep, senior vice president of strategy and partnerships at Take Command. "However, significant advancements have been made in the individual health insurance marketplace that make ICHRAs extremely reliable." For instance, employees can now expect to pay stable premiums and be covered for their preexisting conditions under the Affordable Care Act. Additionally, state-level reinsurance programs help control the cost of individual premiums – a huge boost for employees.
2. My business needs to set up an HR department first.
Smaller employers without a true human resources (HR) department might feel too understaffed to make a healthcare plan change. This is where partnering with a qualified ICHRA administrator simplifies the whole process – from the initial setup to managing daily tasks like employee reimbursements. "As a reference point, I have about 100 employees and I only spend about an hour a month managing employee benefits offerings," says Lange. "Remember, a good ICHRA vendor does all the heavy lifting."
3. My business didn't fit the old HRA models, so I'm unsure if this one will work.
Some may believe that ICHRAs operate under similar circumstances with the same restrictions as older Health Reimbursement Arrangements (HRAs). This simply isn't the case. ICHRAs provide employees with much-needed flexibility. They can select plans that meet their specific needs and be reimbursed accordingly. On the employer side, different contribution amounts can now be established depending on job description or employee class (i.e., full-time vs. part-time employees). Therefore, the versatile nature of an ICHRA totally separates it from its predecessors.
4. My employees might be overwhelmed by their marketplace choices.
As Lange correctly states, "The reality is most employees aren't used to shopping for health insurance." That's why he strongly recommends providing the support that they need to make their decision(s) upfront. For instance, ICHRA platforms can create various guidelines based on budget, eligibility and special coverage needs – all designed to help employees navigate their benefits options. Likewise, partnering with a licensed insurance agent is a good idea to help prevent employees from feeling like they either have too much information, or not enough at all.
5. Switching to ICHRA seems like too much effort.
"Change management is usually very hard," says Lange. "It just is, but when it comes to implementation, it's important to have a partner that helps you through it." Employers may worry about the logistics of an ICHRA change, particularly the onboarding of new employees; however, many ICHRA plan administrators offer personalized assistance to help employers and employees navigate the switch easily. Moreover, they can also provide continued support through webinars and FAQs.
Is an ICHRA right for your business?
When considering if an ICHRA is truly something to invest in for your company and its employees, ask yourself the following questions:
- What health benefits do my employees currently have?
- Do my existing health benefits offerings provide enough coverage for them?
- How does the cost of implementing ICHRA compare to my current plan(s)?
- If I make the switch to ICHRA, who can I partner with to implement a successful transition?
It's best to seek out a licensed insurance agency like ADP® affiliate, Automatic Data Processing Insurance Agency, Inc. (ADPIA®). Discussing your individual business needs with a licensed insurance broker, agent, or other professionals can help you to stay compliant with laws and regulations, as well as get the most out of your insurance plans.
"This is definitely not a 'do-it-yourself' project," concludes Estep. "But ICHRAs offer employers the cost certainty they want, while giving employees the power of choice to cover their health needs in their own ways. That's two huge positives for any business aiming for success."
To learn more about protecting your employees and your business with insurance, check out ADPIA®, for the latest in benefits and ICHRA offerings.
Automatic Data Processing Insurance Agency, Inc. (ADPIA) is an affiliate of ADP, Inc. All insurance products will be offered and sold only through ADPIA, its licensed agents or its licensed insurance partners; One ADP Blvd. Roseland, NJ 07068. CA license #0D04044. Licensed in 50 states. Certain services may not be available in all states with all carriers. Some carriers may charge an additional fee for services. This information is not intended as tax or legal advice. If you have any questions, contact a tax or legal professional. ADP, the ADP logo and ADPIA are registered trademarks of ADP, Inc. Copyright © 2025 ADP, Inc. All rights reserved.
