The ongoing skilled labor shortage affecting every sector of the manufacturing industry undoubtedly has your company seeking creative solutions to attract and retain talent. But doing so while remaining profitable amidst production delays, supply chain disruptions and the rising cost of both goods and services is challenging at best.
Offering quality health benefits has the potential to reduce churn and make your business stand out in a competitive job market, but inflexible group health plans and rising premiums are stymieing many organizations’ efforts. In fact, only 3.8% of manufacturers say it’s affordable to provide health insurance to their employees.
To counteract these pain points, some manufacturing leaders are embracing Individual Coverage Health Reimbursement Arrangements (ICHRAs).
Understanding ICHRAs
ICHRAs are a relatively new addition to the benefits toolbox available to employers. These arrangements allow employers to contribute tax-free dollars to their employees’ individual health insurance premiums and eligible medical expenses. They offer a compliant, flexible and cost-effective alternative to traditional group health insurance plans.
The main advantage of ICHRAs lies in their customization. Instead of providing a one-size-fits-all health insurance plan, companies can set up ICHRAs that align with their employees' diverse needs.
Advantages of an ICHRA
Personalized Healthcare Benefits: ICHRAs allow manufacturing companies to offer a tailored approach to health benefits. Employees can choose their individual health insurance plans based on their specific needs, preferences and location. This level of customization enhances job satisfaction and demonstrates that your company values its employees' well-being, a crucial component to retaining the workers you already have.
Cost Control: Most companies realize an average premium savings of 22% when they move from a fully insured or self-funded plan to an ICHRA. Moreover, the model offers pricing stability by transferring the claims risk of your employee population to the much larger – 30 million people and growing – individual market.
You can forget about surprise renewal rate hikes and variable costs and instead count on predictable pricing. Accurately projecting one of your company’s biggest budget line items is a game-changer in an industry fraught with volatility in seemingly every other area.
Unparalleled Customization: One of the top benefits of choosing an ICHRA is the flexibility that comes with separating employees by classification (think: salaried, hourly, etc.). Your business can choose to offer an ICHRA to its entire workforce, to offer it only to certain classes of employees, or to contribute different reimbursement amounts by employee class.
This versatility has multiple advantages over a standard group plan, including helping employers prioritize their budget for health benefits and allowing companies to target their most highly valued employees with an increased level of benefits. Additionally, it can also incentivize manufacturers to offer health benefits to employee classes they may not have been able to in the past, like part-time or seasonal workers.
Built-In Compliance: As of 2022, manufacturing’s turnover rate was 39%, per the Bureau of Labor Statistics. Replacing a skilled worker can cost a company up to 150% of the employee's annual salary, when you take into account recruitment, onboarding and training expenses.
Beyond monetary costs, a high churn rate also creates the potential for Affordable Care Act (ACA) compliance penalties. When you switch to an ICHRA with a trusted administration partner, you can rest assured you will meet all Employer Mandate and affordability requirements, lessening the burden on your HR team.
Plan Portability: That ease of administration with an ICHRA also extends to employee termination. With an ICHRA, employees own their plan and can take it with them when they leave. This typically eliminates the desire for – and administrative burden of – COBRA, saving your HR team even more time.
Seamless Transition: Transitioning to an ICHRA can be a smooth process when working with the right partner. Manufacturing companies can work with third-party administrators or health insurance brokers to set up and manage ICHRAs, making the process more accessible and less daunting.
Look for a partner that offers a fully managed Open Enrollment, year-round customer support, custom integrations with your HRIS and payroll systems and a platform that is built for enrolling large groups.
Manufacturing companies that have embraced ICHRAs have experienced reduced turnover rates, improved recruitment efforts and increased employee satisfaction. As the manufacturing sector continues to evolve, ICHRAs will likely play an increasingly vital role in helping companies navigate the challenges of workforce retention and stay competitive in a rapidly changing landscape.
By leveraging ICHRAs, manufacturing leaders can build a workforce that is not only skilled, but also loyal and motivated, driving success in the industry for years to come.
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Adam Olson drives go-to-market functions and long-term strategy in his role as Vice President of Growth Management at SureCo, a health care and insurance technology company that specializes in ICHRA administration.
