Employers Shift Health Insurance Decisions to Workers
A growing number of employers are moving away from traditional group health insurance plans and instead providing workers with money to purchase their own coverage through Individual Coverage Health Reimbursement Arrangements (ICHRAs). This approach is gaining traction among small businesses that struggle with rising insurance costs.
ICHRAs were introduced during the Trump administration and have seen significant growth in recent years. Advocates argue that this system provides small companies with an affordable way to offer health benefits while capping their expenses. It also aligns with conservative principles of giving consumers more control over their healthcare choices.
“It’s maybe not perfect, but it’s solving a problem for a lot of people,” said Cynthia Cox of the nonprofit KFF, which studies healthcare issues.
How ICHRAs Work
Unlike traditional employer-sponsored health insurance where companies offer one or two plans, ICHRAs allow workers to choose from dozens of individual insurance market options. Employers contribute a fixed amount to employees’ health coverage based on factors like age and family size. For example, Taro Health, a New York-based insurance startup, contributes between $400 and $2,000 monthly per employee.
This approach provides several benefits:
- Predictable costs for employers
- More tailored coverage options for employees
- Portability of coverage even if employees change jobs
Mark Bertolini, CEO of Oscar Health, notes that “insurance works best when it moves with the consumer.” His company is experiencing growth in ICHRA enrollment across several states.
Challenges for Employees
While ICHRAs offer advantages, they also present challenges for workers. Individual market plans often have narrower provider networks compared to traditional employer-sponsored coverage. This can make it difficult for patients with multiple doctors to find a plan that covers all their healthcare providers.
The process of selecting a plan can also be overwhelming due to differences in coverage terms, deductibles, and coinsurance. Employers typically hire outside firms to help employees navigate these choices by assessing their specific healthcare needs.
Growth Prospects
The HRA Council estimates that about 450,000 people were offered coverage through ICHRAs this year, representing a 50% increase from 2024. While this is still a small fraction of the 154 million people with employer-sponsored coverage in the United States, growth is expected to continue.
Factors that could drive further adoption include:
- Rising healthcare costs
- Potential tax incentives in pending legislation
- Expiration of enhanced government subsidies for ACA marketplace plans
As healthcare costs continue to rise, more employers may turn to ICHRAs as a way to manage their expenses while still providing health benefits to their workers.
