How SIHRA benefits your company
The SIHRA is a financial hedging strategy that helps you liberate trapped capital in your OpEx budget and convert that capital into an interest-free working capital line of credit that you never have to pay back to anyone! And it doesn’t just liberate capital this year, it keeps converting OpEx into free cash flow every year that you continue to offer employees the SIHRA.
What is a SIHRA?
The Spousal Incentive Health Reimbursement Account (SIHRA) is a bolt-on healthcare program option that allows self-insuring organizations with 500+ employees to drastically reduce health spending while simultaneously creating new cash flow.
Best of all, SIHRA accomplishes this without requiring the company to replace incumbent providers or vendors, disrupt any of the company’s current healthcare plans or adding any administrative burden to the company’s Human Resource team.
How SIHRA works
SIHRA allows organizations to effectively limit their healthcare liability by transferring risk. When participating employees self-select the SIHRA option, the employer's healthcare claims liability is immediately capped at the Affordable Care Act maximum out-of-pocket amounts for every employee that transfers to the SIHRA option. This ensures that organizations are not affected by large claims and the resulting increase in group premium rates which inevitably is applied to all participants.
Why SIHRA works
The SIHRA works by leveraging behavioral economics. Science has proven that human beings are risk-averse and will act in their own financial self-interest. SIHRA is a financial product that incentivizes eligible employees to enroll in an alternate group medical plan for the opportunity to have up to 100% coverage of their out-of-pocket expenses.
Traditionally, a self-funded company’s medical claims breakdown is as follows:
As a result, heavy healthcare user employees (those top 5%) and their families jump at the chance to avoid paying thousands of dollars in out-of-pocket expenses that they currently spend.
Thus, as more of these heavy healthcare users enroll (spin-out) to alternate group coverage it dramatically reduces their impact on your claims payout, producing free cash flow that is accretive to your bottom line.
Why the SIHRA impact grows year over year
When employees save thousands of dollars in out-of-pocket expenses after enrolling in the SIHRA, they let all their coworkers know of their savings. Consequently, enrollment has historically grown organically every year, producing larger savings and higher enterprise value impact every single year for our clients.