Private Equity Circling the ICHRA System, Underscoring Need for Action to Protect Workers
Wednesday, November 15, 2023
Recently, two startup companies that push employers to set up ICHRAs announced they received seed money from various private equity firms. Venteur, received $7.6 million in seed money, while another, StretchDollar, raised $1.6 million in pre-seed funding.
One thing that has become clear over the last few years is that when private equity investors enter the health care system, patient care falls victim to profit seeking. Now, ICHRA plans, which allow employers to divide up their employees and dump certain classes into the individual market with only a voucher, are the latest target for private equity. This is bad news for workers and families who rely on the support of high-quality health benefits from their employer.
Venteur’s pitch is premised on the idea that it can offer employees more insurance plans than what a standard employer plan typically offers. But in reality, these plans fail to provide adequate coverage and undermine health equity. Even more concerning, this flawed system exacerbates health care disparities by separating employees into haves and have-nots. Some employees receive typical employer-sponsored benefits, while others, who may be older or have chronic conditions, are forced to fend for themselves. The cost of many of the plans are not covered by the stipend and often fail to provide robust coverage.
Both Venteur and StretchDollar's business models are rooted in the ICHRA system that came into effect following a rule put in place by the Trump Administration in 2020 as a backdoor way to allow employers to skirt the protections included in the Affordable Care Act.
Private equity prioritizes increasing operational efficiency and profits for its businesses, even when that means employees bear the brunt of financial burdens created by ICHRAs. Employees with individual plans may find themselves paying more for less coverage if their ICHRA plan costs surpass the reimbursement amount their employer sets. Consequently, these workers are left to cover this expense out of pocket.
Since 2020, numerous other startups that focus on promoting ICHRAs have launched, each prioritizing profits over quality patient care and coverage options. By placing their focus on cutting costs in the system rather than providing safe and effective care, the needs of patients become an afterthought.
All of this underscores the urgent need for action. The Biden Administration, which has stated its opposition to the Trump ICHRA system, has the power to reverse the rules that created it. Keep US Covered (KUC), continues to urge the Administration to follow through and make sure we are putting health equity and patient care over private equity profits.