As healthcare costs continue to rise, many employers are exploring Individual Coverage Health Reimbursement Arrangements (ICHRAs) as a flexible, cost-controlled alternative to traditional group health plans. However, when it comes to unionized workforces, introducing an ICHRA adds layers of complexity due to collective bargaining agreements (CBAs) and employee protections.
Before moving forward, employers must carefully evaluate how ICHRAs align with union contracts, bargaining obligations, and legal requirements.
What Is an ICHRA?
An ICHRA is an employer-funded health benefit that reimburses employees for individual health insurance premiums and qualified medical expenses. Rather than offering a one-size-fits-all group health plan, employers set defined reimbursement amounts, and employees choose the individual health coverage that best fits their needs.
Learn more about the structure of ICHRAs from Healthcare.gov.
Can ICHRAs Be Offered to Unionized Employees?
Yes — but with critical considerations. According to HHS regulations, ICHRAs can be offered to employees covered by a collective bargaining agreement if the arrangement complies with the terms of the agreement.
For unionized employees, offering an ICHRA will likely trigger a mandatory subject of bargaining under the National Labor Relations Act (NLRA) for private-sector employers, or similar public sector labor laws for government employers. This means an employer cannot unilaterally impose an ICHRA; it must be negotiated with the union.
Key Considerations for Employers and Unions
-
Review Existing Collective Bargaining Agreements
Many CBAs explicitly define health benefit structures, premium sharing, and coverage levels. Carefully review contract language to determine:
- Whether moving to an ICHRA would change defined benefits
- If current agreements require negotiation before any benefit structure change
- Any side agreements or memorandums of understanding related to healthcare
-
Understand Class Designation Rules
ICHRAs allow employers to segment employees into distinct classes, including one for “employees covered by a collective bargaining agreement.”
Employers must:
- Treat all employees within a union class consistently
- Apply uniform reimbursement terms within the class
-
Bargaining Over Reimbursement Amounts and Contributions
Unions will likely seek negotiation over:
- Employer contribution amounts
- Eligible reimbursable expenses (e.g., premiums, qualified medical expenses)
- How ICHRA offerings impact overall compensation and take-home pay
Failing to bargain appropriately could result in unfair labor practice claims, grievances, or even contract disputes.
-
Address Tax Implications and Premium Assistance
Employees offered an ICHRA generally cannot receive premium tax credits (PTCs) through the marketplace if the ICHRA is deemed affordable.
Employers and unions should discuss:
- How affordability determinations impact compensation packages
- Scenarios where some employees may decline ICHRA to retain PTC eligibility
Clear communication around tax impacts is critical for successful implementation.
-
Plan for Transition and Education
Switching from a traditional group plan to an ICHRA model is a significant change that impacts how employees shop for and manage their health coverage.
Employers should plan for:
- Providing educational materials that explain how ICHRAs work
- Offering support tools to help employees shop for individual plans
- Partnering with a third-party administrator (TPA) to simplify enrollment, claims substantiation, and compliance
A smooth transition process will build trust and increase employee satisfaction.
Pros and Cons of ICHRA for Unionized Workforces
| Pros | Cons |
| Predictable employer costs | Requires union negotiations |
| Employee choice of individual coverage | Potential loss of ACA premium tax credits |
| Flexibility in benefit design by class | Administrative burden during rollout |
| Portability for employees | Risk of lower bargaining power over health plan terms |
Conclusion: Collaboration is Key
ICHRAs can be a viable, flexible option for unionized workforces, but success depends on proactive collaboration between employers and unions.
Employers should:
- Start early discussions with labor representatives
- Be transparent about cost objectives and healthcare goals
- Offer robust education and support to help employees navigate the individual market
With thoughtful planning and collective bargaining, ICHRAs can offer flexibility while continuing to honor the protections and priorities negotiated by unionized employees.
