As employer-sponsored benefit costs rise, here’s how HR leaders can use healthcare reimbursement arrangements (HRAs) to drive business value while supporting employees. 

By Andy Lange

For decades, HR leaders have fought against the stereotype that HR is a cost center. Hiring, payroll, employee benefits, and compliance add up to the biggest expense on a company’s balance sheet. To turn revenue into lasting business value, companies need the right talent, structures, and workplace culture. In other words, an organization’s long-term success depends on the decisions its HR leader makes every day. In forward-thinking organizations, HR leaders are now considered strategic business partners—and they’re making an impact at the highest level.  

HR will always find it difficult to generate revenue, but one way HR leaders can make a positive impact on the balance sheet is through a strategic approach to employee benefits. The rising cost of group health insurance is leading to difficult decisions in organizations around the country, and the impact of recent legislation could make matters worse. One way HR leaders can deliver value is through employee benefits strategies. By taking a new approach to benefits, HR leaders can free up thousands of dollars and attract a new generation of employees seeking more than a healthy paycheck. For many, that solution could be the health reimbursement arrangement (HRA). 

Group Insurance Makes Life Difficult for HR leaders 

HR leaders are under pressure to control healthcare costs while delivering competitive employee benefits. However, the unpredictable nature of group health insurance makes that difficult, if not impossible. Low participation or high usage can send costs soaring and lead to double-digit renewals that manny companies simply cannot afford. In these difficult moments, HR leaders have to choose between passing the additional cost onto employees or offering lower quality benefits. 

But when it comes to group health insurance, things are about to get even tougher. The expiration of enhanced premium tax credits will force people who have been receiving the credits to either pay more for healthcare or go without it. That means more people turning to local hospitals for treatment, driving up the cost of uncompensated care. In an attempt to recover losses, hospitals negotiate higher rates with insurance companies, which then bump up premiums.  

While the cost of group insurance is a huge challenge, it’s only part of a larger problem. Many HR leaders are concerned that their benefits package is falling short for some employees. With just a handful of group plans to choose from, not everyone is guaranteed access to their preferred doctors or specialist treatments. Employees may be forced to choose between an ill-fitting group plan and going without coverage altogether.  

A growing number of HR leaders are turning to individual coverage HRAs (ICHRAs), a benefits model that allows employers to set a fixed allowance for employees to spend on individual health insurance plans and eligible expenses. With ICHRA, HR leaders can lock in their company’s healthcare spend even as prices rise across the board. 

A Healthier Option for Businesses and Employees 

For HR leaders, moving from group health insurance to ICHRA is a major decision. Many employees rely on their employer-sponsored health insurance, and any changes to the coverage could have an immediate impact on their well-being. But for businesses grappling with high costs and poor employee satisfaction, ICHRA offers a lifeline.  

HRAs help HR leaders achieve: 

• Dollar savings: Group health insurance is expensive, and costs are only going up from here. ICHRA helps companies escape yearly rate increases and keep their healthcare spend within budget. With access to low-premium plans, employees can also choose to reduce their monthly spend and pay for additional services only when they need them.   
• Budget stability: Employers set a per-employee healthcare allowance that remains stable regardless of participation or usage. HR leaders know the maximum monthly cost of employee health benefits and can communicate that information to the company’s CFO.  
• Flexible coverage: ICHRA allows employees to choose insurance based on their medical requirements, location, or budget. Customizable coverage works particularly well for multigenerational workforces with diverse needs. By empowering employees to make their own healthcare decisions, it also lifts the burden of HR leaders and their teams. 
• Fair benefits for everyone: Group health insurance often excludes part-time or temporary workers. With ICHRA, HR leaders can help everyone access coverage by aligning reimbursement amounts with employees’ schedules. Location-based ICHRA classes ensure employees in different states enjoy equal purchasing power. 
• Hands-off administration: With ICHRA, the role of HR leaders shifts from negotiating rates and enrolling employees in plans to educating and supporting employees as they choose the right plan for them. Managing an ICHRA requires a few hours per month at most. 

In some cases, HR leaders are reinvesting savings in the employee experience. Increased retention bonuses, learning and development opportunities, and wellness stipends can help businesses attract and retain talent. For HR leaders in industries facing high turnover, those investments can make a measurable difference. 

Certainty in Uncertain Times 

Today’s businesses are facing unprecedented uncertainty: regulatory changes, supply chain disruption, and waning consumer confidence can all impact financial stability. With group health insurance, the cost of employee benefits adds significantly to that uncertainty.  

HR leaders can support their organizations by choosing a stable, predictable benefits model. HRAs allow companies to lock in their benefits spend and protect their budget against the rising cost of healthcare. For HR leaders at enterprise organizations, switching to ICHRA now could translate to millions of dollars in savings over the next five to 10 years.  

Even if an organization is satisfied with its group plan today, it’s worth remembering that there are options in the future. Clouds are gathering over the healthcare market; HR leaders should do everything they can to prepare for the storm. 

Andy Lange is senior vice president of people at Take Command.