Offering compelling healthcare benefits can make an organization stand out amongst the competition, driving both the recruitment of new employees and the retention of existing ones over time.
88% of job seekers “heavily consider” or at least “somewhat consider” insurance benefits when picking between a high-paying job and a lower-paying job with better benefits, according to SHRM.
Offering robust health insurance will not only aid in recruitment but also boost job satisfaction and employee loyalty.
So, which health insurance leads to the best retention numbers? Let’s compare the retention impact of Individual Coverage Health Reimbursement Arrangements (ICHRAs) versus traditional group plans.
ICHRA: Flexibility that appeals to employees
ICHRA stands for Individual Coverage Health Reimbursement Arrangement. In this type of health benefits plan, employers reimburse employees for individual health insurance premiums.
ICHRAs are a relatively new type of health benefits plan compared to traditional group insurance. ICHRAs only became available in 2020.
With ICHRAs, employees pick their ideal individual health plan on the marketplace or directly from an insurance carrier. The employer reimburses the employee up to a monthly allowance. With an ICHRA, employees can choose an individual policy from any marketplace carrier, providing them with more flexibility to find a plan that suits their needs and budget.
Benefits of ICHRAs for retention
Tailored coverage. Employees shop for a plan that best fits their needs.
Flexibility. ICHRA can cater to remote employees. Since the employee is picking a plan from the marketplace or directly from the carrier, they can get a plan that best fits their needs.
Predicability. Employers’ healthcare costs are rising. Between 2023 and 2024, the average per-employee cost of employer-sponsored healthcare grew 5%, and it’s estimated it’ll rise an additional 6% in 2025. ICHRAs offer predictable, tax-efficient allowances that help employers save on benefits and plan costs, meaning reliable and consistent coverage for employees
Potential challenges of ICHRA for retention
Navigating the marketplace. Instead of being given a plan or choosing between a few options, employees have the entire marketplace to explore. This variety can be intimidating or burdensome to some employees who aren’t used to having a choice. That’s where tools like Thatch come in handy, offering a private exchange where employees can easily navigate their healthcare options and shop for a plan.
Traditional group plans: Stability that builds loyalty
With a traditional group plan, an employer selects a policy that provides collective coverage to all employees. Employers select a plan (or multiple plans) from an insurance provider, and the employees all receive a similar benefit.
Typically, costs are shared between employees and employers. An employer may cover all or a portion of the premium, with employees paying the remainder through pre-tax payroll deductions. Plans often include coverage for health benefits like doctor visits, hospital care, and prescription medications. Traditional group plans might also offer dental, vision, or mental health coverage.
Traditional health plans can feel like a set-it-and-forget-it type of plan for employees. They may pick a plan or be offered a single plan by an employer annually, and then, except for pre-tax premium payments, there’s not much to monitor.
Administrative Burden: What Employers Should Know
Traditional group plans often require significant time and resources for plan selection, annual renewals, premium negotiations, and compliance management. With ICHRA, administration shifts to setting reimbursement amounts and verifying claims, which can be streamlined with third-party administrators or software. This can be a major relief for employers seeking to reduce HR workload.
This difference can significantly impact an employer’s ability to offer health benefits, especially in industries with part-time, seasonal, or remote workers who may not all want or need traditional group coverage. With ICHRA, employers have the flexibility to provide health benefits regardless of workforce size or participation rate, enabling them to extend coverage options to employees who might otherwise be left out. This inclusivity can help employers attract and retain talent in today’s increasingly diverse and geographically dispersed labor market.
Participation Requirements: A Key Difference in ICHRA vs Group Plan
One of the most significant differences in the ICHRA vs group plan comparison is participation requirements. Traditional group health insurance plans generally require a minimum percentage of employees—often 70% or more—to enroll in the plan. This participation threshold can be a major hurdle for small businesses, startups, or organizations with high employee turnover. If a company can’t meet the required participation rate, it may lose access to group coverage or face increased premium costs.
Compliance and Regulatory Considerations
Both ICHRA and group plans must comply with regulations like the ACA, ERISA, and COBRA. However, the specific requirements differ. Employers should ensure their chosen solution meets all federal and state regulations and consider working with a benefits professional or administrator.
Benefits of traditional plans for retention
Familiarity. Until recently, traditional plans were one of the only options employers could provide for coverage, making the process familiar to most employees.
Ease of use. With traditional plans, employees have two options: they can opt in or opt out of employer coverage. They don’t need to shop the marketplace for plans.
Drawbacks of traditional plans for retention
Less flexibility. The lack of choice regarding coverage could feel stifling to employees with diverse needs. The cookie-cutter approach may not suit a remote workforce.
Long-term employer expense. The rising cost of healthcare for employers can be unpredictable and more challenging to budget for, which can impact long-term sustainability.
Retention outcomes: What the data shows
While the offering is relatively new to the market, ICHRAs are showing promising growth in employee retention and satisfaction.
According to the HRA Council, ICHRA adoption among qualifying employers grew 29% between 2023 and 2024. Industry experts speculate, while it's still early, that ICHRAs could help boost retention in the long term.
Here’s the same HRA Council Report:
“ICHRA/QSEHRA already show high retention rates and ‘stickiness,” underscoring their sustainability as a benefits solution which delivers both employer/employee satisfaction.”
Similarly, ICHRAs are proving to benefit employers who were traditionally unable to offer health insurance to employees. 83% of ICHRA adopters are offering a healthcare benefit to employees for the first time.
Create custom experiences with Thatch
Traditional group plans and ICHRAs offer unique advantages. However, promising data is emerging around ICHRA and employee satisfaction overall, indicating that they might be the right fit for employers prioritizing employee flexibility and cost control.
Are you ready to move to ICHRA? Let Thatch help create a plan that meets your employees’ needs.
