ICHRAs Enrollment Surges 50% as Employers Shift Health Insurance Costs to Employees

An increasing number of employers in the United States are shifting the responsibility of health insurance decisions entirely to their employees. These employers are no longer offering traditional insurance plans but instead providing funds for employees to purchase Individual Coverage Health Reimbursement Arrangements (ICHRAs).

Proponents of this model argue that it offers a viable solution for small businesses that cannot afford traditional insurance, while also allowing employers to control rising costs and align with conservative political goals of giving individuals more autonomy in choosing their insurance.

However, ICHRAs transfer the risk of finding insurance to employees, forcing them to navigate the complexities of selecting their own plans. "It may not be perfect, but it is solving problems for a lot of people," said a representative from a non-profit organization focused on healthcare issues.

Traditionally, employers in the U.S. provide health insurance through group plans, offering one or two options and covering a significant portion of the premiums. In contrast, ICHRAs involve employers providing funds for health insurance, with employees choosing their own plans. Employers using ICHRAs often hire external companies to assist employees in making these decisions.

ICHRAs were created during the first term of the Trump administration and initially saw slow growth in enrollment. However, the scale has rapidly expanded in recent years. The significance of ICHRAs lies in providing employers with predictable costs and avoiding the need for companies to make insurance decisions for their employees.

This model is particularly beneficial for small businesses, helping them mitigate the risk of annual insurance cost increases, especially when some employees have high medical needs. The cost for employees' insurance is determined based on their age and the number of people covered, ranging from 400 dollars to over 2000 dollars per month.

ICHRAs offer employees the flexibility to choose from numerous options in the individual insurance market rather than being limited to the few plans offered by their employers. For instance, some insurance companies provide plans specifically designed for individuals with conditions like diabetes, allowing people to find coverage that better meets their needs.

Additionally, employees can retain their insurance even after leaving their jobs, although they may need to pay the full premium. This continuity means they do not have to search for new plans that cover their primary care physicians. A leading insurance company is expanding its ICHRA offerings across multiple states, emphasizing the importance of insurance that can move with consumers as they change jobs.

However, there are potential downsides for employees. Individual market health insurance plans often have narrower coverage networks compared to employer-sponsored plans. Patients who see multiple doctors may struggle to find a single plan that covers all their providers. The complexity of terms like deductibles and copayments can also be overwhelming for employees, making it crucial for employers to provide assistance in selecting plans.

Companies or technology platforms that help set up ICHRAs typically ask employees about their medical needs and future surgery plans to provide tailored recommendations. While there is no nationwide data on the number of people obtaining insurance through ICHRAs or similar programs for businesses with fewer than 50 employees, industry associations promoting this model have seen significant growth.

An association that works with companies providing ICHRAs reported that approximately 450,000 people obtained insurance through these arrangements this year, a 50% increase from 2024. The actual market size could be twice as large, according to the association's executive director. However, these arrangements still represent a small fraction of employer-sponsored health insurance in the U.S., with around 154 million people obtaining coverage through their jobs last year.

Several factors could drive more employers to adopt ICHRAs, including the continued rise in healthcare costs, which prompts companies to seek ways to limit cost fluctuations. Additionally, a Republican tax bill being considered by the Senate may include tax incentives to encourage this model. If the enhanced subsidies for the individual market under the Affordable Care Act expire this year, more people may become eligible for ICHRAs, as those already receiving government subsidies cannot participate in this program.