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How much ICHRA money should you give your employees in 2025?

Published on

Sep 23, 2024

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Author

Stacy Edgar

As we approach January 1, it's time to set your ICHRA Funding Strategy for 2025 and decide how much to provide your employees for health insurance. In this post, we answer frequently asked questions that we've received from our clients.

What Are My Options for 2025?

As an employer, you have a range of flexible options at your disposal:

Option 1: Keep Your ICHRA Funding Strategy the Same

If your current approach is working well and employees are happy, you can choose to maintain it. You'll stick with the same "method" (percentage-based or flat-dollar contributions), but your costs will adjust based on local insurance rates. For example, at Venteur, we decided to keep our 2025 ICHRA Funding the same as 2024, which resulted in a 5% increase in overall cost.

Option 2: Keep Your Budget the Same, Adjust Your Strategy

If you prefer to keep your overall budget unchanged, you can adjust your strategy instead. This may involve reducing your contribution percentages or shifting your employee classifications to fit the available budget better while providing adequate coverage options. The con of this approach is that your employees may have to pay more for their health insurance premiums if they keep the same plan.

Option 3:Try Something Completely New

You have the flexibility to implement an entirely new strategy. This could mean exploring different contribution models, adjusting your employee classes, or setting up additional perks to attract and retain talent in a competitive market. Current Venteur customers can access financial modeling tools in their employer portal that will allow them to model different scenarios.

What Is an "Affordable" ICHRA Funding Strategy?

There are two definitions to consider:

The Legal Definition:

The IRS has defined affordability guidelines under which employers need to ensure their ICHRA offerings are affordable, or they could face penalties. For 2025, your employees' share of health insurance premium costs cannot exceed 9.02% of their household income.

The Functional Definition:

Beyond legal compliance, an "affordable" strategy should balance company financials with employee needs. This means ensuring that your employees can reasonably afford the insurance options available to them under your plan without feeling financial strain.

How do I know how my ICHRA Funding Strategy will impact my employees?

Current Venteur customers can log into their Employer Portal to model scenarios. Our tools will show the economic impact of your ICHRA Funding Strategy on each each employee. This can help you anticipate challenges your team might face and fine-tune your contributions accordingly.

What Does a Good ICHRA Strategy Look Like?

The answer depends on your specific business needs and goals. For many of our clients, a "good" strategy typically looks like:

- 80% of the cost of a Gold plan for employees

- 50% of the cost of a Gold Plan for dependents

However, it's important to remember that "good" is subjective. If you're in a competitive industry where talent is hard to come by, you should fund your ICHRA more generously to attract top candidates. For other businesses, ICHRA offers the chance to provide health benefits for the first time ever. If this describes you, we celebrate you. Offering even basic coverage can significantly impact employee morale and retention.

Other Tips for 2025:

Reevaluate Your Employee Classifications: If your workforce has changed or you're facing recruitment or retention challenges, it might be time to reassess your employee classes and adjust your ICHRA contributions accordingly.

Consider Local Insurance Market Trends: Rates vary significantly by region, so be aware of local trends when setting your ICHRA budget. Our tools can help you analyze local market shifts and make adjustments.

As always, the Venteur team is here to help and can provide additional modeling for your team so that you can feel confident that your ICHRA funding strategy for 2025 not only aligns with your company's financial goals and supports your team's well-being.

FAQs

You got questions, we got answers!

We're here to help you make informed decisions on health insurance for you and your family. Check out our FAQs or contact us if you have any additional questions.

How does an ICHRA work?

ICHRA stands for Individual Coverage Health Reimbursement Arrangement (ICHRA). This health arrangement allows you to pick your own health insurance plan using your employer’s monthly tax-free allowance. These funds can be used to cover insurance premiums, including dental and vision, as well as qualified medical expenses.

What are the benefits of an ICHRA?

Your health plan belongs to you, and you can keep your health insurance if you leave your company.
You get to choose from any qualified health plan on the market. Venteur can help you select a plan where your preferred doctors, providers, and prescriptions are covered.
If you choose a health plan that costs less than your employer contribution, the extra funds are added to Venteur’s Health Wallet, an account used to pay for qualified medical expenses.

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What's the difference between an ICHRA and a Group Plan?

Group health insurance plans are purchased by companies and offered to their employees. Traditional group plans take a one-size-fits-all approach to healthcare, giving employees limited choice when it comes to their coverage options. Employer-sponsored ICHRAs give employees a tax-free allowance to pick any plan on the public exchange that meets their unique needs.

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What is the Health Wallet and how can I use it?

1. What Your Health Wallet Balance Represents:

Your Health Wallet balance could be thought of as a measure of the medical expense reimbursements you're entitled to under your health insurance plan. It's essential to note that it isn't quite like a bank account with a set amount of accessible cash. Rather, consider it as a marker of what you're eligible to get reimbursed for as part of your ICHRA plan.

When you shop for insurance through the app, you will see a dollar amount that is available for out-of-pocket expenses. This amount is what gets contributed to your Health Wallet account for your use in reimbursements. However, depending on how your employer has setup the account, it may be available immediately or it may be available after every monthly invoice.

2. Your Health Wallet Account:

When your account is setup, there is a predetermined way on how your Health Wallet functions for your reimbursement funds. The first scenario is that there is money that has been set aside at the start of the period which can be used for your reimbursements. You may see the entire amount entitled to you is immediately available for medical expense reimbursements. It's like having a store of health benefits ready to be used when you need them.

3. Simplifying the Health Wallet Experience:

We're always striving to enhance your experience and are currently working on making the Health Wallet balance operate more like a pre-paid debit card. This shift aims to streamline the funding process further and allow you quicker and more direct access to your health reimbursements, leading to an even smoother journey for you.

Remember, whether your account shows the funds immediately or after every invoice, it doesn't affect the overall sum you're entitled to under your ICHRA plan; it merely affects the timing of when you will receive the reimbursements.

Your trust is important to us, and we're continually striving to make our services better for you. If you ever have questions about your Health Wallet or anything that would help make for a more understandable benefits experience with us, don't hesitate to reach out to our customer service team.

Do ICHRAs meet the Affordable Care Act's employer mandate?

The Affordable Care Act (ACA) requires that employers with more than 50 full-time equivalent employees provide health insurance to their employees. This is known as the 'employer mandate'.

ICHRAs can meet the mandate as long as they are considered 'affordable.' According to IRS, 'an ICHRA is affordable if the remaining amount an employee has to pay for a self-only silver plan on the exchange is less than 8.39% of the employee’s household income.'

To simplify, this means that the ICHRA contribution an employee receives cannot be less than the lowest-cost silver plan available to the employee - (9.02% of the employee's household income).

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