ICHRA adoption grows as Congress mulls codifying the coverage into law
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A nascent form of health coverage that creates an alternative gateway for employers to offer Affordable Care Act coverage to their workers is seeing rising uptake, especially among midsize to large employers.
Adoption of individual coverage health reimbursement arrangements, or ICHRA plans, rose 34% from 2024 to 2025 among employers with 50 or more full-time employees, according to a new report from trade association the HRA Council.
Still, the vast majority of ICHRA users remain companies with fewer than 20 employees, most of which are providing health coverage for the first time through the arrangements, the HRA Council said.
ICHRA allows employees to shop and choose between plans on the ACA exchanges and have some or all of the cost offset by their employer through a stipend. Unlike in traditional group health plans, businesses can set a fixed amount to help their workers cover healthcare costs, defraying some financial risk from offering insurance.
ICHRAs were first available as a coverage option in 2020, and have grown rapidly since, according to research. However, the lack of industry-wide data collection makes it difficult to get a clear picture of adoption nationwide — market experts estimate about 500,000 to one million Americans are covered in ICHRA arrangements.
About 450,000 U.S. employees and their dependents were offered ICHRA or a qualified small employer HRA for the 2025 plan year, according to the new report. However, that estimate should be taken as a floor for the larger overall market, which could encompass one million people or more, the HRA Council said.
Proponents of ICHRAs argue they create an avenue for employers to offer benefits that they may not be able to otherwise afford.
The share of small businesses offering health insurance has dropped significantly over the past two decades, from upwards of 47% in 2000 to about 30% in 2023, according to an analysis by health software company TakeCommand. That decline has coincided with an increase in the cost of providing employer-sponsored insurance.
As for employees, ICHRAs give them freedom to choose from a variety of plans based on their needs, instead of from a smaller range of choices set up by their employer. People who enroll in ACA plans via ICHRA tend to be younger as well, a population that's usually healthier — so, their enrollment helps stabilize the risk pools and keep marketplace plans affordable, ICHRA advocates say.
The coverage arrangements were expanded by President Donald Trump during his first term in rulemaking in 2019, as the president promoted policy alternatives to traditional ACA coverage.
However, unlike many of the Trump administration's healthcare priorities, ICHRAs enjoy relatively bipartisan support. Democrats generally approve of ICHRAs because they add new members to the ACA marketplaces, while Republicans support the expanded choices they provide employees.
Though ICHRAs are backed by regulation, the plans have never been backed by law. However, that could soon change.
Republicans in Congress are currently considering codifying ICHRAs as 'Custom Health Option and Individual Care Expense' or 'CHOICE' plans. Massive reconciliation legislation passed by the House in June would also provide small employers offering ICHRAs with a tax credit.
However, the Senate Finance Committee stripped the ICHRA provisions from the upper house's version of the bill released on Monday.
To date, Indiana is the only state that's established a tax credit for ICHRA adoption, though a handful of others — including Ohio, Texas and Georgia — are considering the legislation that would create incentives for small employers to offer the arrangements, according to the HRA Council.
The legislative uncertainty hasn't stopped private equity, venture capital and some major insurance companies from investing heavily into ICHRAs, betting that the market for the products will continue to grow.
Investors have funneled millions of dollars into companies providing ICHRA administration and health benefits technology. Funding rounds this year alone include upwards of $100 million for Remodel Health, $40 million for Thatch and $20 million for Venteur, for example.
Meanwhile Centene, the largest marketplace carrier in the U.S., is embarking on a full-court press to introduce more employees to its ICHRA plans. The insurer recently created a division wholly dedicated to promoting ICHRA and launched the arrangements in six states during open enrollment for 2025.
'Large-scale ICHRA adoption will be a journey of several years ... but considering the small group health insurance market covers 62 million Americans and the full commercial group market covers 170 million, we see a healthy addressable market over the long term,' Centene CEO Sarah London said during the payer's investor day in December.
'Aggressively pursuing this line of business is an easy choice,' London added.
Similarly, Oscar Health has worked to expand its ICHRA membership, viewing it as a valuable alternative for smaller businesses to provide insurance as medical costs continue to rise, CEO Mark Bertolini said during an Axios event in Washington, D.C. in May.
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