Understanding the Value of Individual Coverage Health Reimbursement

A home health provider’s success depends on reputation, and that reputation is only as good as the people taking care of their patients. Following the Great Resignation and the COVID-19 pandemic, high turnover rates—compounded by inflation and economic uncertainty—continue to wreak havoc on home health care across the country.

Turnover can lead to short-term and long-term problems. Not only is turnover disruptive to operations when staffing is inadequate, but it also contributes to burnout among the employees who remain and frustration among patients when service suffers. The cost of turnover is at an all-time high, and replacing an employee can cost 75% to 200% of their annual salary.

Other factors, such as productivity, should also be considered. According to the Society of Human Resources Management, the loss of productivity and institutional knowledge due to a departing employee can result in as much as two-thirds of the costs incurred from turnover. Turnover is impacting the bottom line and the patient experience for home health providers nationwide.

Home health providers can boost recruitment and retention by improving their benefits package, but generous benefits are exceedingly expensive. With health insurance costs at an all-time high in 2024, can the home health industry afford to offer extensive health benefits? Perhaps a better question is: Can they afford not to?

Fortunately, a new benefits solution allows home health providers to reimburse their employees for health insurance, rather than buying it for them. The solution is known as individual coverage health reimbursement arrangements (ICHRA). Employees can simply purchase the individual health plan of their choice from healthcare.gov or a state-based exchange and get reimbursed on their paycheck, tax-free. Personalized benefits may alleviate the pain home health providers are often faced with today.

Sized to Fit

For small, independent home health providers, keeping up with compliance and regulations for health insurance without a human resource department can be daunting—and traditional group plans often prohibit costs.

Offering an ICHRA for health benefits can help keep valuable management-level employees happy and healthy, while minimizing administrative burdens and costs. Many job seekers list health insurance as a top motivator—behind salary—for accepting a job. ICHRAs are an effective recruitment and retention tool for home health providers looking to offer benefits for the first time. With lean teams, owners of small home health or homecare agencies can effectively outsource benefits with ICHRAs, offering quick setup and less administrative work each month. With an ICHRA, providers can simply set a monthly reimbursement budget that works for them.

For larger home health providers required by law to offer health insurance, ICHRAs represent an alternative to traditional group health plans. Home health providers often struggle to keep health care costs down as they face steep renewals yearly, particularly when dealing with multiple locations or participation rate issues.

Gallagher Home Health Services, a health care services provider in the Pittsburgh area, has used ICHRA to overcome skyrocketing traditional insurance premiums and challenging recruiting environments. Gallagher employs semi-remote office and field staff, including therapists and nurses, who deliver care directly to patients at their homes or health care facilities. Previously, many of their job applicants rejected offers due to the excessive cost of health insurance options. However, ICHRA allowed employees to choose personalized health plans, leading to significant cost savings, improved recruitment and retention and higher employee satisfaction.

Unlike traditional group health insurance plans, ICHRA allows Gallagher’s employees to pick from various individual health plans tailored to their health needs and financial situations. This transition enabled Gallagher to control their health benefits budget more effectively, avoiding unpredictable and often double-digit renewal rate increases for traditional group plans.

The transition feedback from Gallagher’s existing and prospective employees was positive, and they appreciated the personalized and flexible benefits. In areas like Allegheny County in Pennsylvania, employees had access to more than 70 plans, including health maintenance organization and preferred provider organization options.

When faced with expensive renewal costs, the most common strategy to keep costs down is to increase employee contributions and shift more costs to workers—a move that is often met with criticism. However, ICHRA offers companies an alternative to double-digit renewal rates. Many large companies immediately save 30% by switching from group health insurance. Additionally, ICHRA makes it easy to offer insurance in separate locations without having to worry about participation rates.

Growth Curve

No matter the company’s size, ICHRA caters to all types of employees—seasonal, part-time, hourly or salaried. Each of these groups can be offered the right health insurance for them through ICHRA.

Due to the many positive impacts of ICHRA, the home health industry is one of its early adopters and a trendsetter for the larger health care sector. In an industry with one of the highest turnover rates, this new benefit model allows home health providers to boost recruitment and retention, care for their team, control costs and administrative burdens and focus on taking care of patients.