ICHRAs vs. Traditional Small Group Health Plans

The trade-offs employers shouldn't ignore

Employers today are navigating more health insurance choices than ever, including alternative coverage options such as Individual Coverage Health Reimbursement Arrangements (ICHRAs).

Before considering an ICHRA, it’s important to understand what these arrangements require and how they compare to a standard group plan. With an ICHRA, businesses reimburse employees for individual health insurance rather than provide a traditional group plan. Below is a practical look at how the two approaches differ, so employers can evaluate the facts behind the marketing claims and choose the structure that best fits their needs.

HIGH-LEVEL SUMMARY: ICHRA’s vs. BCBSKS Small Group Plans

There are 4 key considerations:

1. Ease: For employers and employees
2. Network: Limitations exist
3. Portability: Pros and cons
4. Predictability & Compliance: No surprises

IN-DEPTH ANALYSIS:

Ease for employers

ICHRAs: ICHRAs are often marketed as "simple" because employers set a defined monthly allowance for their employees to buy individual coverage. But employers still need to manage employee notices and adhere to various administrative and non-discrimination requirements. These tasks may be outsourced to a third-party vendor, but that will add an administrative cost for the employer. The work doesn't disappear - it just shifts.

Traditional small group plans: With a group plan, employers offer a health plan to match their budget and goals, then rely on knowledgeable BCBSKS teams and brokers to handle the heavy lifting. This structure reduces hands-on administrative demands for most employers.

BOTTOM LINE: Employers can outsource ICHRA administrative tasks to a third-party administrator, easing internal workload but this may increase overall costs.

Simplicity for employees

ICHRAs: Employees must shop for their own individual ACA plan, comparing dozens of options with different networks, formularies, deductibles, and coverage rules. A misaligned choice can mean losing access to preferred providers or facing unexpected costs. Premiums also vary widely by age, location, and metal tier, which can lead to varied employee experiences.

Traditional small group plans: With group coverage, employees may choose from a few quality plans with in-and out-of-network coverage selected by the employer. The guided structure simplifies decision-making and reduces confusion. A group plan also allows an employer to promote health and wellness initiatives offered by the plan when all employees have the same benefits.

BOTTOM LINE: ICHRAs offer broad choice, while group plans offer simplicity and consistency.

The network is key

ICHRAs: Employees must choose from individual market networks that can be limited, vary by county, and may not include the providers they rely on. This may limit access to certain providers or facilities, depending on where employees live, adding to employee costs if they visit an out-of-network provider.

Traditional small group plans: Group coverage can offer preferred provider option (PPO) plans which offer out-of-network and nationwide coverage. Group plans typically provide more standardized, predictable network access, which can save employees money with more access to in-network providers.

BOTTOM LINE: Network structure matters - and it can vary significantly between individual market and employer sponsored plans.

Portability cuts both ways

ICHRA portability is often promoted as a major benefit. However, portability is not always an advantage.

ICHRAs: Yes, employees can keep their individual plan when they leave - but they lose the employer contribution and take on the full age-rated cost. This may reduce the practical value of portability for many workers. In some cases, portability may even make it easier for employees to leave.

Traditional small group plans: Group coverage remains tied to employment. An employer-provided benefit can support retention and strengthen employee loyalty.

BOTTOM LINE: Portability may sound appealing, but for many employees, the stability and employer-backed value of group coverage offer more real-world staying power.

Predictability and compliance mean fewer surprises

Both ICHRAs and group plans allow employers to control their contribution. However:

ICHRAs: Require affordability testing at the individual employee level using age-rated local premiums. This can be complex for employers to manage, or costly to utilize a third-party administrator to manage. Employees who accept ICHRA reimbursements at any point during the year are ineligible for any Premium Tax Credits for those months regardless of the affordability calculation.

Traditional small group plans: Generally meet ACA requirements by design and offer employers more predictable annual adjustments and straightforward contribution strategies.

BOTTOM LINE: ICHRAs require individualized affordability calculations, while group plans offer more streamlined compliance.

We’re here to help.

For Kansas employers who determine a traditional small group plan aligns better with their needs, BCBSKS offers local support, broad networks and plan flexibility designed specifically for small businesses. Employers can choose from multiple plan designs - including EPO, PPO and level-funded options - and rely on a team that understands the Kansas market and provides hands-on service.

Employees look to their employer to offer strong, reliable benefits. For more than 80 years, BCBSKS has worked with small businesses across Kansas supporting employers with stability, personalized member care, and a team committed to service.

Browse your group plan options and get a free quote today. Our Sales Consultants can help you find the best options for your business.
Call 866-584-0171 (Monday–Friday, 8 a.m.–4:30 p.m.)
Email: smallgroup.sales@bcbsks.com