How to help employees find an individual health insurance plan for your ICHRA

From the employee’s perspective, the basic difference between a traditional group health plan and an Individual Coverage Health Reimbursement Arrangement is that they can pick their own plan with an ICHRA. Under a group health plan model plan, it’s the company’s management that curates the insurance plan(s).

Baselining

Before giving your employees a budget and unleashing them on healthcare.gov, it would be a confidence-building exercise – as well as a valuable first step – to take stock of what they do know. That is, what are their general healthcare needs? How much are they spending on health insurance now?

Some healthcare costs are predictable and might even be precisely known. That’s especially true if we don’t think in terms of actual dollars, but as specific services and goods required. Do they go to their primary doctor’s office once per year or once per month? Somewhere in between? More frequently? Do they need ongoing treatment by a specialist and, if so, how many office visits per year does that incur? Many families with active children assume at least one emergency room visit per year. Does anyone in the household require ongoing treatment with medicines that are still on-patent and thus frighteningly expensive?

As you might guess, different employees will have different answers to these questions. The answers will have a direct bearing on the kind of health insurance plan they should choose, and this is one of the big advantages of using a service like Thatch to provide healthcare for your team: they can match a health insurance plan with their specific needs.

ICHRA Plans and Premium Tax Credits

ICHRA plans can be complex for employees who are eligible for a premium tax credit when purchasing ACA-compliant health insurance through the Marketplace or State exchange. These employees have the option to either opt-out of the ICHRA and use their premium tax credit or waive their credit and participate in the ICHRA. However, they cannot claim both.

Further, if the ICHRA is considered affordable according to ACA rules, employees lose the premium tax credit if they opt-out of the ICHRA. On the other hand, if the ICHRA is considered unaffordable under ACA rules, employees can claim the premium tax credit and waive their right to the ICHRA.

It is also important for employers to provide notice to employees about the ICHRA plan, including information about its impact on premium tax credits. These are typically PDF docs shared with the employee, which specify their exact allowance and terms. This helps employees understand their options and make informed decisions regarding their healthcare coverage. ICHRA administrators like Thatch typically generate these notices for you.

Overall, the interaction between ICHRA plans and premium tax credits can be complex, and employees should carefully consider their eligibility and the potential impact on their healthcare coverage and costs.

If you, as a startup founder, are at once truly concerned with a) the ongoing fitness and financial wellness of your work force and b) not getting into the healthcare insurance business yourself, you can at least share this advice with your employees. Then you can sign them up for an ICHRA and let them make informed decisions on the government-run exchanges.

Know when to say no

The sign-up period for plans on the HealthCare.gov marketplace generally starts on November 1 for the year starting the following January 1. Individuals are given until January 15 to make their selection and make their first premium payment. That two-and-a-half-month stretch is called the Open Enrollment Period.

But that’s not the only opportunity for ICHRA participants to get coverage on an exchange. They qualify for a Special Enrollment Period if they suddenly lose health coverage, move, get married, welcome a new child, experience a drop in household income below a certain threshold or experience other recognized life events.

When the SEP starts and how long it runs varies depending on several factors. For what it’s worth, being offered an ICHRA is one of those recognized life events so, if anyone who expects to be offered one in the next 60 days qualifies. Once someone is offered one, they then have another 60 days. Healthcare.gov, the federal government’s Affordable Care Act-chartered exchange, offers an SEP screener to help people determine how long an SEP they might qualify for.

Metal health

Our healthcare coverage plans have been classified as gold, silver, or bronze-level. And because access to health care here is inherently unfair and some people can afford and demand something better than gold, there are also platinum plans. And, because nobody wants to be a loser, there is no metal to depict the lowest-ranked plans. What would you call them? Aluminum? Tin? Lead? So the participation trophy of health insurance is called a catastrophic plan, and we discussed them here. [link to catastrophic plan blog which is still unpublished].

The real difference between the platinum, gold, silver and bronze plans is what proportion of the total cost is covered by the insurer, and how much of the total cost is absorbed by the participant. At the platinum level, the insurer pays 90%, and the participant pays only 10% for doctors’ visits, prescriptions and the like. The split is 80/20, 70/30 and 60/40 for gold, silver and bronze respectively. As you might infer, the higher the metal level, the higher the premium.

The more medical attention a policyholder needs, the more attractive the higher-end plans are. Healthy people who don’t qualify for catastrophic plans – those are usually reserved for people in their 20s – might reasonably opt for bronze plans.

The bronze plans have an added sweetener in that they are the only ones that are qualified to be used in tandem with Healthcare Savings Accounts, or HSAs, which are taken out of employees’ pre-tax pay, thus lowering the income they need to report to the Internal Revenue Service.

Plan basics

Here are a few TLAs – that is, Three-Letter Acronyms – you should be aware of when deciding which kind of healthcare coverage you prefer:

• HMO: A Health Maintenance Organization pays for care only from affiliated doctors and won't cover out-of-network care except in an emergency. An HMO may require you to live or work in its service area to be eligible for coverage. On the plus side, HMOs are designed to provide integrated care and focus on prevention and wellness.

• PPO: A Preferred Provider Organization contracts with hospitals and doctors to create a network of participating providers. Subscribers pay less when they use providers that belong to the plan’s network, but can still use healthcare providers outside the network at an additional cost.

• EPO: An Exclusive Provider Organization is a managed care plan in which only services provided by doctors and hospitals in the plan’s network are covered. There are exceptions for emergencies, of course.

• POS: A Point of Service plan is similar to a PPO, but also requires subscribers to get referrals from their primary care doctor in order to see a specialist.

Plan takeaways

1. They all involve networks. HMOs and EPOs require subscribers to stay within those networks except in emergencies. PPOs and POSs simply charge policyholders more when they don’t. 2. HMOs and POSs require referrals to see a specialist. PPOs and EPOs don’t. 3. The rights to see a wide range of providers and to visit a specialist on one’s own recognizance are valuable. Subscribers pay for those rights through higher premiums.

You can read more about PPOs vs HMOs here, or more about EPOs vs PPOs here.

Getting help selecting a plan'

Sometimes it's helpful for employees to talk with someone who can help them understand their options and make an informed decision.

On HealthCare.gov – and on most if not all state exchanges – shoppers can find someone to help, usually called an “assister” or “navigator”. These are people who are paid – by the government, not the insurance companies – to help people make more informed and rational decisions. Thatch (and typically other ICHRA administrators) provide this service directly as well.

Adding it all up

ICHRAs make premiums more affordable, but there are also out-of-pocket costs to consider.

The premium just reduces the direct cost of health care; it doesn’t eliminate it. Far from it. Out-of-pocket costs – which, as we said, could be 40% of the service cost for bronze plans – include coinsurance or copays. The difference between these two terms is a matter of how you define it: as a percentage of the doctor’s bill – that’s coinsurance – or as a fixed dollar amount – that’s a copay.

In whatever way those charges are computed, they generally don’t kick in until a deductible is met. Most plans, though, do pick up for preventive health services, annual checkups or some disease management programs without reference to a deductible. Some plans parse deductibles into one bucket for services and another for prescriptions, and some family plans specify an individual deductible and a family deductible.

Offsetting deductibles is the out-of-pocket maximum – the most money the policyholder will spend in a year on covered services before insurance picks up everything else.

Obamacare doesn’t control the prices. The value of the exchanges is that they set a standard, comparable set of covered services, then provide a medium to compare similar policies quantitatively and qualitatively. Your employee will get the opportunity to see how five different options look side-by-side.

Ultimately, the goal of the policy shopper must not be to find the lowest premium, but to find the overall least awful alternative. HealthCare.gov offers a good, one-page primer to which to refer your employees.

Any questions?

Wait, we’re not done yet. While it’s important to compare on price, that’s not the only important difference between competing policies. To hit the high points:

Does the employee’s doctor participate? Anyone who has a longstanding, trusted relationship with a primary-care physician should check with that doctor’s office to check if it takes any health insurance they might be considering a switch to. We say again: Check with the doctor’s office. Don’t check with the insurance company itself. Some are unscrupulous enough to throw the names of every doctor in their coverage area into their database just to make their brochures thicker, then remove a doctor’s name only after the practice tells them to. By the way, doctors themselves – and even hands-on nurses – have no clue what insurance a practice might take. You need to talk to the office manager.

Which prescription drugs does the plan carry? Each plan has a list of treatments that it will pay for; it’s called a formulary. Nobody wants to commit to 12 months of paying premiums for a plan that won’t pay for some basic maintenance medication that’s been treating their chronic condition for years. But it happens every day.

Which procedures will the plan cover? Not every plan will pay for every operation. This is important to understand especially in the realm of reproductive health.

What about extended coverage? Major medical plans typically don’t cover optometric or dental care. Separate dental plans are generally available on the exchanges, and there might be non-standard medical plans available which include dental and vision services.

Is the policy in effect when the subscriber is traveling abroad? Most American healthcare policies stop at the water’s edge. It’s best to know for a fact whether this is the case before buying an airline ticket. It’s also best to know what other options are available, either in terms of travel health insurance or the generosity of the host country’s healthcare infrastructure.