ICHRAs allow companies to compensate employees for insurance purchased in individual markets and may help clinical laboratories reduce patient bad debt
Both employees and their employers are frustrated with current options for health coverage. Now, a recent report from the HRA Council suggests that more employers are turning to Health Reimbursement Arrangements (HRA) as an alternative to traditional group insurance coverage to cope with the increasing cost of employee health benefits. This will be of interest to clinical laboratories that must collect copays/deductibles from patients. Health insurance arrangements that make it easier for patients to pay help labs reduce patient bad debt.
According to its website, HRA Council is “dedicated to improving and expanding health coverage options for millions of workers by giving employers better ways to offer workers health insurance.”
The non-partisan advocacy organization, which consists of insurers, brokers, employers, and other stakeholders, estimates that only 500,000 workers are currently covered by these plans nationwide. That number of workers represents a 29% increase since 2023, with most of the growth coming from large employers.
Under HRA arrangements, employers provide non-taxed financial assistance to workers who then obtain coverage for themselves and/or their families in the insurance marketplace.
One type of plan, known as the Qualified Small Employer HRA (QSEHRA), was established as part of the 21st Century Cures Act, which Congress passed in 2016. QSEHRAs, however, are available only to businesses with 50 or fewer full-time (or equivalent) employees. Most of the recent growth has come from Individual Coverage HRAs (ICHRA), established under regulations issued by the Trump Administration in 2019.
In contrast to QSEHRAs, ICHRA plans are available to companies of any size, HRA Council notes.
“It’s a way to offer coverage to more diverse employee groups than ever before and set a budget that controls costs for the companies,” HRA Council Executive Director Robin Paoli told KFF Health News.
“ICHRAs are bringing a fresh new approach for employers who need a new or different solution to enable providing health benefits to their employees,” said Andrew Reeves (above), senior vice president and general manager, Gravie ICHRA, in the HRA Council report. Gravie is one of the health benefits companies allied with HRA Council. “Through the defined contribution approach that ICHRA brings, employers are now able to set their budget and enable employees to make their own individual decisions on the coverage they need for themselves and their families. ICHRAs are delivering an approach to employee benefits that is both stable yet at the same time flexible for the individual,” he added. These types of alternatives to traditional employer-sponsored health plans may also help clinical laboratories and anatomic pathology groups reduce patient bad debt. (Photo copyright: LinkedIn.)
How ICHRA Plans Work
As explained by HRA Council, “an ICHRA allows the employer to allocate to each employee a specific amount of money to spend on ACA [Affordable Care Act]-compliant individual health insurance plans. Employees then purchase their own plans, and the employer reimburses them up to the allocated amount.”
The rule allows employers to define up to 11 classes of workers and offer different benefit packages to each. These benefits can be based on characteristics such as:
geography,
whether the worker is employed full-time, part-time, or seasonally,
whether the worker is paid a salary or hourly wage, and
Employers can choose to offer ICHRAs to some classes and traditional group plans to others. Within each class of employee, employers also can vary compensation based on age—up to a 3-to-1 ratio—since older workers will generally pay higher premiums than younger ones.
For example, the HRA Council explains, “if an employer offers its 26-year-old employee $300 per month, it could only offer the oldest employee up to $900 per month.”
However, some consumer advocates have pointed to potential downsides of these plans, KFF Health News reported.
The rule, they concede, provides guardrails to prevent companies from moving only their sicker employees—the ones most costly to cover—to the individual market. For example, employers must offer the HRAs to entire classes of workers, and the rule prevents them from defining classes that contain only a small number of employees.
However, the authors contend that employers can still target HRAs to classes more likely to be sick while offering group coverage to other classes. In general, they argue, employers with sicker workforces will be most attracted to HRAs. As these workers enter individual insurance markets premiums could rise, particularly “in states that today have individual markets with a relatively low-cost mix of enrollees,” the authors wrote.
Although the rule allows companies to vary compensation based on age, older workers will still pay more for insurance unless the contribution covers the entire cost of the premium. This would likely make the HRAs “less attractive to employers by making it harder for employers to avoid leaving some workers worse off,” the authors noted.
The Brookings authors also observed that workers who accept the contributions are ineligible for premium tax credits enabled by the Affordable Care Act.
KFF Health News noted other potential downsides as well. “Plans sold on the individual market often have smaller provider networks and higher deductibles than employer-sponsored coverage. Premiums are often higher than for comparable group coverage.”
In addition, ICHRAs can create administrative headaches that have prompted some employers to return to group plans. “Instead of a company paying one group health plan premium, dozens of individual health insurers may need to be paid,” KFF Health News reported. “And employees who’ve never shopped for a plan before need help figuring out what coverage works for them and signing up.”
One Employer’s Example
KFF Health News highlighted one organization that appears to be happy with its newly adopted ICHRA: Lycoming College in Williamsport, Penn. The school, which provides health benefits for 400 faculty, staff, and family members, saved $1.4 million in healthcare costs in the first year after implementing the plan. “Employees saved an average of $1,200 each in premiums,” KFF noted.
Prior to the transition, one employee with a family of five paid $411 per month for a plan that had a $5,600 annual deductible. Under the ICHRA, he pays $790 per month with no deductible.
“It’s nice to have the choice to balance the high deductible versus the higher premium,” he told KFF Health News. Before, “it was tough to budget for that deductible.”
Which is where the benefit to clinical laboratories comes back in. Making it easier and affordable for patients to pay their co-pays and deductibles also means more patients showing up at labs for doctor ordered tests and blood draws.
Though the cost of clinical laboratory testing is not highlighted in KFF’s annual survey, it is a component in how much employers pay for healthcare plans for their employees
Employers now pay higher health insurance premiums than ever for family coverage. However, because of the current tight labor market, they are generally absorbing much of that increase rather than passing the higher costs on to their workers. That’s one key takeaway from KFF’s 26th annual Employer Health Benefits Survey, which the non-profit published on Oct. 9, 2024. While the report does not comment specifically about the cost of clinical laboratory testing or genetic testing and how they may contribute to rising insurance costs, it stands to reason they are part of growing healthcare costs for corporate health benefits.
The KFF survey found that premiums for family coverage increased 7% in 2024, reaching an average of $25,572. That follows a 7% increase in 2023. “Over the past five years—a period of high inflation (23%) and wage growth (28%)—the cumulative increase in premiums has been similar (24%),” KFF stated in a press release.
However, the amount paid by workers has gone up by less than $300 since 2019. It now stands at an average of $6,296, a total increase of 5% over five years. On average, workers covered 25% of family premium costs in 2024, down from 29% in 2023. Workers with single coverage paid an average of $1,368—16% of the annual premium cost—compared with 17% in 2023.
“Employers are shelling out the equivalent of buying an economy car for every worker every year to pay for family coverage,” KFF President and CEO Drew Altman, PhD (above), said in a press release. “In the tight labor market in recent years, they have not been able to continue offloading costs onto workers who are already struggling with healthcare bills.” Rising costs of clinical laboratory testing is always part of the mix contributing to increased worker insurance premiums for employers. (Photo copyright: KFF.)
HDHP/SO plans, as defined by KFF, “have a deductible of at least $1,000 for single coverage and $2,000 for family coverage and are offered with an HRA [Health Reimbursement Arrangement] or are HSA [health savings account]-qualified.” Point-of-service plans “have lower cost sharing for in-network provider services and do not require a primary care gatekeeper to screen for specialist and hospital visits,” the report states.
Cost Sharing via Deductibles
Average deductible amounts—which KFF identified as another form of cost-sharing—varied depending on the type of plan, employer size, and whether the worker had family or single coverage.
For workers with single coverage, average deductibles across all plan types rose from $1,655 in 2019 to $1,787 in 2024, a total five-year increase of about 8%. The average in 2023 was $1,735. These numbers were for in-network providers.
The report noted that some family plans calculate deductibles using an aggregate structure, “in which all family members’ out-of-pocket expenses count toward the deductible,” whereas others use a separate per-person structure. The report includes breakdowns of average deductibles across all types.
Who Offers the Best Benefits?
In general, the KFF report found that large companies—defined as those with 200 or more workers—tend to offer more generous health benefits than smaller ones. Virtually all large companies (98%) offered health benefits, while slightly more than half of small companies (53%) do so.
Among companies that do offer health benefits, the average deductible at a small firm was $2,575 compared to $1,538 at large firms. Among workers with family coverage, the average contribution toward overall premium costs was $7,947 (33%) at small firms compared to $5,697 (23%) at large firms. Among workers with single coverage, the numbers were $1,429 (16%) at small firms compared to $1,204 (14%) at large firms.
The report also found variations in overall premiums and health benefits across nine different industries. For example, healthcare firms paid the highest premiums for family coverage—an average of $26,864—followed by transportation/communications/utilities at $26,601. Companies in agriculture, mining, and construction paid the lowest premiums, an average of $22,654.
There were wide variations by industry in terms of how many firms offer any health benefits. Among state and local government entities, 83% offered health benefits, followed by transportation/communications/utilities (69%), manufacturing (65%), wholesale (62%), healthcare (58%), and finance (56%). Just 40% of retail businesses and 49% of agriculture/mining/construction businesses offered health benefits.
Health Screening Coverage
The KFF report did not include data about insurance coverage for clinical laboratory services. However, one section did address employer willingness to provide opportunities for health screening.
Among large businesses, 56% offered health risk assessments, in which individuals answer questions about their medical history, lifestyle, and other areas relevant to their health risks. A smaller number (44%) offer biometric screening, which “could include meeting a target body mass index (BMI) or cholesterol level, but not goals related to smoking,” the report said. Only 9% of small businesses offered biometric screening, the report found.
KFF conducted its survey between January and July 2024 among a random selection of public and private employers with at least three workers. The survey excluded federal government entities but included state and local government. A total of 2,142 employers responded.
Inflation during this current administration definitely hit consumers in the health insurance premium pocketbook. At the same time providers raised their own prices making it more expensive for people with HDHPs to come up with the cash required by their annual deductible. While clinical laboratory and genetic testing are not highlighted in KFF’s survey, they certainly play a role in increasing costs to healthcare consumers and are worth considering.
Elements of Obamacare specifically support employer programs designed to improve the health of employees
Who would have believed that, after passage of the Affordable Care Act back in 2010, a fast-growing trend would be that of employers spending more money to develop employee wellness programs and offer medical clinics within corporate facilities? At a minimum, this development creates new opportunities for clinical laboratories to be direct providers of medical laboratory testing services to corporations.
Employee Wellness Programs Incorporate Medical Laboratory Testing
There is a simple reason why employers are jumping on the employee wellness bandwagon. Evidence demonstrates that incentivizing employees to live a healthier lifestyle can help reduce the cost of providing health insurance. It can also contribute to less absenteeism and increased employee productivity, both of which are important benefits to employers.
New data affirming this trend can be found in the 2013 Health Care Survey conducted annually by AON. AON is a global re-insurer that provides risk management services, insurance, and human resources solutions. About half of all U.S. employers now offer employee wellness programs, according to a recent study by Rand Corp., an independent think tank based in Santa Monica, California.
Now in its fifth year, Indiana’s CDHP now covers 90% of eligible state employees
Many pathologists and clinical laboratory managers are carefully watching for evidence that new healthcare delivery models can deliver improved patient outcomes at a lower cost. Now comes evidence that a consumer-directed health plan (CDHP) for Indiana state employees—that incentivizes consumers to manage their healthcare dollars more carefully—is saving money for both employees and the state.
According to a story in the Centre Daily Times (CDT), state officials in Indiana claim that the state’s CDHP has reduced the state’s overall health benefit costs and met with high subscriber satisfaction.
Governor Mitch Daniels and other Indiana officials claim that, since introducing the CDHP in 2006, the Hoosier state’s overall health benefit costs are down by more than 10%, with only 2% of subscribers switching back to a traditional plan, the CDT reporter wrote.
Oregon adopts health engagement model for its state employees, as evidence of cost savings grows
Across the nation, pathologists and clinical laboratory managers will want to learn about a new model of healthcare reform. It is the “health engagement model” (HEM) and it is being rolled out by a number of health insurers.
Variations of the HEM model are gaining ground in states around the country because health insurers see HEMs as a way to reduce costs and improve quality of healthcare. One new HEM is taking root in the Pacific Northwest. The Oregon Public Employees’ Benefit Board (PEBB) recently adopted a new HEM for state employees, according to a story published by the Lund Report.
What may cause some medical laboratory managers to sit up and take notice is the fact that PEBB’s HEM is producing impressive participation numbers. “Thus far, 48% of members have enrolled for health plans,” stated Ingrid Norberg, Communications Coordinator at PEBB. “And 87% of participating members chose to participate in the health engagement model.” (more…)
