Workers Dumped into ICHRA Health Coverage Can Expect Higher Out of Pocket Costs
1.5 million will have their health care replaced by ICHRAs this year
A report from Avalere Health released earlier this month examines the impact of Individual Coverage Health Reimbursement Arrangements (ICHRAs) on American workers. The main takeaways from the report paint a concerning picture: 1.5 million people will see their health care replaced by ICHRA plans that could mean higher costs and fewer doctors, and an expansion of the health disparity gap nationwide.
Because affordability is top of mind for American workers, it warrants examining closely what losing traditional employer-provided health care would mean for a worker. The study finds ICHRA coverage likely will often come with higher deductibles and higher out-of-pocket limits. On top of that, those being moved to ICHRAs might be in for another hit to their budgets. The stipend they receive from their employer, in place of the coverage they are used to, might not cover the full cost of the premiums for a plan on the individual market.
The report compared potential ICHRA plans with the kind of job-based insurance people already have and found that workers on an ICHRA can expect...
ICHRA plans typically result in higher deductibles than job-based coverage. Data from the report shows that the average deductible for an individual with an exchange silver plan is $4,500, while the average for employer-provided group coverage is only $1,434.
Average Premiums and Deductibles by Coverage Type - Table 4
Higher Out-of-Pocket Limits
Beyond the out-of-pocket costs from higher deductibles, higher limits under ICHRA plans could also mean people will pay more for the care they need. As detailed in the report, the average maximum OOP limit individuals can expect to pay on an ICHRA plan – $5,725 – is significantly higher than the $4,416 average for group health plans. Someone with more health care needs than another could be saddled with much higher costs under ICHRA coverage. As the report says, “the OOP limit can be reasonably expected to impact individuals who use healthcare to a greater degree than people who rarely use healthcare.”
Unintended Cost Disparities
ICHRAs also increase costs more from some than others. For example, older workers could be hit with higher premiums. From the report: “Amongst employees offered ICHRAs, individual market premiums will be higher for an older employee than their younger colleague, potentially creating a disparity for the older workers offered ICHRAs.” And lower wage workers who currently qualify for Advance Premium Tax Credits – which are central to affordability – could lose them if offered an ICHRA. As the report indicates, Kaiser Family Foundation data shows that among the employers who intend to use ICHRAs, 60% intend to target low-wage workers for offers.
A system that stacks the decks against older and lower wage workers, potentially making them pay more, moves us in the wrong direction. That’s why Keep US Covered continues to support the Biden Administration’s efforts to revisit the rules that allowed ICHRAs to enter the marketplace. We will be sharing more in coming weeks on other issues with ICHRAs, including the difference in coverage quality workers might expect when being transitioned off their existing health care. To read the full report and learn more about our campaign to rollback harmful ICHRA and junk insurance policies put in place under the previous administration, go to KeepUSCovered.org.