Once you know ICHRA is a good fit you are now ready to define the contribution strategy. Before building out the model, it's helpful to have a conversation with the employer to define their ICHRA goals
What problem are they trying to solve?
Every group has different needs and goals when it comes to the benefits they offer to their employees. Some employers know exactly what they're looking for while others may need some assistance in figuring that out. In this conversation we want to help employers understand what problem they're trying to solve with ICHRA. Are they trying to save money? Are they trying to meet affordability standards? Are they trying to generate high quality employee benefits? Having a clear vision of their goals will help as you work to create a contribution strategy that will work for each groups unique demographic.
Financial:
Many employers make the switch to ICHRA because it's more affordable than their group policy. If they are trying to save money, it's helpful to determine what their budget is, especially if there are a lot of savings on the table. If they know how much money they're willing to spend on health benefits, that gives you parameters to work with as you model. Some employers want to just meet affordability standards while others want to be able to offer generous benefits to their employees. Helping them to understand their options and determine their financial goals makes defining a contribution a lot easier.
Employee Retention:
Offering competitive benefits is one way employers can draw in and retain great employees. The benefit of offering ICHRA as an employer is the power it gives to employees to be in control of their health benefits. The higher the contribution amount offered means a greater buying power for the employees. Great benefits promote employee retention and loyalty, which means lower turn over rates. Employee retention is a benefit to companies beyond the financial cost each year. In some cases employers make the switch to ICHRA to be able to offer more competitive benefits to their current and future employees. I these instances, the employer goal is less about saving money and more about creating a rich contribution strategy.
How ICHRA contribution differs from group
Because ICHRA is so different than group insurance, employers often don't understand how to decide the amount of money to give to each of their employees. Once the threshold of affordability is met, determining where to cap the contribution amount can be difficult for those who are used to the cost structure of group insurance. Often employers will want to pay a percentage of everyones coverage but that can be difficult to determine when every employee has the choice to pick different plans.
Moving away from the group mindset
Those employers who are use to group insurance instinctively want to turn back to what's familiar and that often looks like them wanting to pay a percentage of each employee's coverage. The reason this can be difficult is because of the personal choice provided to employees with an ICHRA. If an employer wants to pay 50% of all their employees health benefit, that percentage changes based on what plan the employee chooses. If one employee chooses a bronze plan and another employee chooses a gold low, the percentage the employer is paying changes. However, if an employer is adamant about a percentage model we suggest that you determine a benchmark tier level to base the contribution off of (e.g. low gold plan). You can then adjust your contribution amounts until you reach around 50% for each employee class.
When you're having the conversation with your employer groups about contribution amounts, we suggest you begin with something that's similar to what the employees are currently being offered. It will not be a pleasant transition to ICHRA if employees end up paying more for worse benefits. As you model your new group you can add a preferred plan that is similar to what the group policy currently is and adjust contribution amounts until you get close to what the employees currently pay for coverage. If the goal is to stay in the employers budget and while maintaining similar benefit offerings to employees. Click here to learn how to add a preferred plan to a model.