ICHRAs: A successful benefits strategy for your remote workforce

By Ben Light

Workers may be returning to offices and rebelling against full days on Zoom, but companies are still sourcing employees from a broader geographic pool.

According to the Society for Human Resource Management, 70% of employers are now open to hiring out-of-state talent to fill positions. Hiring remote and geographically dispersed workers offers many benefits, such as access to a larger and potentially less expensive talent pool. However, this shift also presents challenges in building a company benefits package. In our traditionally one-size-fits-most benefits landscape, it has become increasingly difficult to find a single plan that meets the needs of a distributed workforce.

Enter individual coverage health reimbursement arrangements. Introduced in 2020, ICHRAs allow employers to provide employees with a reimbursement—or allowance—to purchase their own health insurance. Employees are typically given decision support tools for plan selection, payment solutions to avoid out-of-pocket premiums and platforms to manage their accounts. But most important, employees are given control, which is especially relevant for employees working thousands of miles from company headquarters.

How does it work in practice? Here are four ways ICHRAs can help employers meet the unique needs of a dispersed workforce:

1. Provide equal buying power across locations. With ICHRAs, employers can create a budget and adjust their allowance model so that employees can afford comparable coverage regardless of where they live.

For example, if an employee in New York City receives the same $500 allowance as an employee in Des Moines, the latter can likely purchase a significantly richer plan. By creating allowances based on geography, employees can rest assured that their allowance is balanced among peers.

2. Empower local carrier selection. Although many carriers have a nationwide presence, there are arguably carriers with a stronger presence in certain locations. As a result, companies offering limited carrier choices may have some winners and some losers among their distributed workforces.

Because ICHRAs are purchased on an individual basis, each employee can select from typically hundreds of plan options in their geographic area, enabling them to keep their doctors, explore cost differentials and make necessary year-over-year changes.

3. Accommodate personal variables. Besides a distributed workforce, many employees have distributed families, such as children attending out-of-state colleges. ICHRAs allow employees to select plans that work for themselves and their children (or even spouses) living outside the home.

For example, a plan through Kaiser might meet the needs of your employees in California, but it might not meet the needs of your employee’s child, who is attending the University of Michigan.

4. Change locations and plans. Moving can be stressful. Wondering whether your company plan will meet your needs once you unpack shouldn’t add to the stress. With an ICHRA, it doesn’t have to. While 8.2 million Americans moved across state lines in 2022, moving is considered a qualified life event, which means employees can re-select their plan based on their new ZIP code.

Distance can pose challenges in a work environment, but it shouldn't complicate benefits. For those companies with employees across the street and the country, an ICHRA can be the perfect solution for meeting the needs of your entire team.

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