More Employers Turning to ICHRAs for Health Insurance
A small but growing number of employers are shifting away from traditional health insurance plans, instead opting for Individual Coverage Health Reimbursement Arrangements (ICHRAs). This approach gives workers the money to purchase their own health insurance, allowing them to choose from a variety of plans available in the individual market.
ICHRAs were introduced during the Trump administration and have seen increasing adoption in recent years. Advocates argue that this system benefits small businesses that struggle to afford traditional insurance by providing a more predictable cost structure. It also aligns with conservative goals of increasing consumer choice in healthcare.
“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 group plans, ICHRAs allow employees to select from dozens of individual insurance market options. Employers contribute a fixed amount to their employees’ health coverage, and outside firms often assist workers in choosing appropriate plans.
For instance, companies like Taro Health base their contributions on factors such as the employee’s age and the number of people covered under the plan. This can result in monthly contributions ranging from $400 to over $2,000 per employee.
Benefits and Drawbacks
One of the main advantages of ICHRAs is that they provide employees with more flexibility in choosing health insurance that suits their specific needs. For example, individuals with chronic conditions like diabetes can opt for plans that offer specialized coverage. Additionally, workers can retain their coverage even if they change jobs, although they would then need to pay the full premium.
However, there are also potential downsides. Individual market plans often have narrower provider networks compared to traditional employer-sponsored coverage. This can make it challenging for patients who see multiple doctors to find a plan that covers all their healthcare providers.
The process of selecting an appropriate plan can also be overwhelming for employees, with factors like deductibles, coinsurance, and coverage terms to consider. To mitigate this, employers typically work with brokers or technology platforms that help guide employees through the selection process based on their specific healthcare needs.
Growth and Future Prospects
While exact numbers are difficult to track nationally, the HRA Council estimates that around 450,000 people were offered coverage through ICHRAs this year, representing a 50% increase from 2024. This still represents a small fraction of the approximately 154 million people enrolled in employer-sponsored health coverage in the United States.
Several factors could drive further growth in ICHRA adoption. Rising healthcare costs may encourage more employers to seek cost control measures. Additionally, potential tax incentives in proposed legislation and the expiration of enhanced government subsidies for Affordable Care Act marketplace plans could make ICHRAs more attractive to both employers and employees.
As healthcare costs continue to climb, more companies may look to limit their exposure to rising expenses. “The enhanced subsidies, they crowd out private financing,” noted Brian Blase, a former White House health policy adviser during the Trump administration.
In conclusion, while ICHRAs present both opportunities and challenges, they are likely to play an increasingly significant role in the evolving landscape of employer-sponsored health coverage.
