I'm not implying that Bavvy (or ICHRA’s) are a retirement solution, but we do see several parallels between the evolution of the Retirement Industry and what’s emerging in the Healthcare Industry today.
For those of you who are old enough to remember the traditional pension plan of our parents’ generation, they were available to many employees after decades of hard work with their employer. During the Pension Plan days, Employers had responsibility for funding the plans, managing the assets, and administering the benefits on behalf of the Employee, while the Employee would receive the benefit at a specified point in time and under the control of the Employer.
Around 1978, 401K's started becoming an option and introduced a new way of thinking about Retirement savings. Instead of Employers having more responsibility and control of the pension savings, with 401k Plans, the Employees got to select the investment strategy, time horizon and risk tolerance based on their individual needs.
It was like going from black and white ….to COLOR. Employees were now securely in control of managing their own Retirement future and having more shared responsibility to prepare for their golden years.
ICHRA’s are now evolving in the same transition into health plans. Before, Employers selected group health plans - based on corporate strategy and company goals - which left the Employee with little control, increasing plan cost, and an inability to choose their medical coverage based on their personal need.
We've seen Employee choice become much more popular, as we shepherd in a new workforce. ICHRA’s are allowing Employees to get back into the driver’s seat for their own health insurance. Employees can now take a contribution from their Employer (like they do with 401K plans) and decide how they want to spend that contribution under an individual health care plan. Whether they are married people, “a young invincible”, or a family household, they can now direct how and where they get their health coverage based on their individual need; and the Employer gets to provide them with the contribution to do so.
Both 401(k) plans and ICHRA’s, allow employees to contribute pre-tax dollars. In the case of a 401(k), these contributions are for retirement savings, while ICHRA contributions can be used for qualified medical expenses. Additionally, contributions to both 401k and ICHRA plans are typically tax-deductible for employers and employees, making them attractive options for both parties. Both plans offer some degree of portability. 401(k) plans can be rolled over into new employer plans or IRAs; and ICHRAs can be retained by employees when they change jobs, so Employees don’t have to lose the benefits. It's a WIN-WIN for the Employer and Employee.
Now the Employer gets to step away from making decisions for the entire group and minimize compliance reporting, participation requirements, and claims exposure, all while allowing the Employee to choose what's best for them.
The future of health plans seems to be going in a very similar trajectory to Retirement Plans, which is allowing ultimate choice for the Employee to decide what's best for them!
Bavvy is an opportunity for Employees to access a new, modern way of doing Healthcare Insurance which incorporates the ultimate choice while allowing the Employer to provide the benefits which drives a robust and engaged workforce.
So maybe Bavvy really is the new 401K. Contact us to learn more about Bavvy.