In this dynamic and unpredictable economy, managing costs is a critical aspect of any business’ operations. Unsurprisingly, controlling healthcare budgets often sits near the top of the list of fiscal challenges. Following our previous blog about how ICHRA is the best cost-cutting alternative to traditional group plans, in this post we dig a little deeper! Read on to learn about three key strategies for using ICHRA to better control your health benefit costs!
Group healthcare plans’ unpredictable premium increases make it nearly impossible to forecast future budgets and have any clear idea of your costs. Unlike group plans, with ICHRA, last year’s claims and the size of your group have no impact on the cost of your premium for next year. This stability in pricing translates to generally significantly lower average increases than the average price hike for group plans. This consistent, predictable YoY budget increase makes it much easier to forecast your healthcare costs for years at a time!
Coverage tiers are another great facet of ICHRA that help companies optimize their healthcare budgets. By creating tiers, businesses can allocate different healthcare stipends to employees based on their age, number of dependents covered, and location. These tiers are a great way to control costs without cutting coverage for those who need it most.
So how do these tiers work?
Age-Based Tiers: Businesses can customize their ICHRA benefits allowance model based on employees' age. For example, younger employees are generally able to access plans with lower premiums and less comprehensive coverage. As such, the ICHRA benefits allowance for these younger employees can be lower. Alternatively, older employees with more medical needs may require more expensive, robust health plans. ICHRA enables businesses to provide larger benefits stipends to older employees specifically to address this increase in required coverage.
Dependent-Based Tiers: Not all employees that have dependents choose to include them in their employee-sponsored healthcare plan. However, for those that do want coverage for a spouse or children or both, the plans accessible to them will be much more expensive. ICHRA lets businesses offer employees different stipend amounts based on their number of dependents. This flexibility allows employees to choose the appropriate level of coverage, reducing the financial burden for both the employer and the employee.
Location-Based Tiers: Where you live can have a huge impact on the cost of your healthcare plan. Unsurprisingly, the same type of healthcare plan will cost more in New York City than in a suburb of Cleveland, Ohio. ICHRA enables businesses to differentiate their allowance models based on the location of their employees. As a result, companies are able to optimize costs across the country without compromising the quality of care provided.
Employee classes are another great tool within ICHRA that businesses can use to align their healthcare costs with their greater financial goals. Similar to the way tiers work, businesses can categorize employees into categories such as full-time, part-time, hourly, salary, and others - and then create different allowance models for each category, or class. For example, businesses may choose to provide a higher allowance to salaried employees than they provide to hourly or seasonal employees. This ICHRA strategy offers a valuable opportunity to optimize costs by tailoring the benefits allowance for each class rather than being limited by a one-size-fits all solution that must apply to all categories of employees.
One of the main advantages of ICHRA is the ability to be strategic in the way you manage healthcare budgets and cut costs without negatively affecting employees’ access to care. Three of the best strategies for leveraging ICHRA to achieve an organization’s financial goals include budget forecasting, coverage tiers and employee classes.
Want to learn more about how to use these strategies in real time? Zorro’s advanced quoting tool is the perfect way to get insight on how these strategies work. We can build a live model together that incorporates all of these different components so you can see exactly how the ICHRA solution leads to reduced costs and a stable budget.
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