Why ICHRA Plans Are Gaining Popularity Among Employers and Employees

Understanding ICHRA: A New Health Coverage Option

Individual Coverage Health Reimbursement Arrangements (ICHRA) are becoming a key alternative for employers seeking to provide health insurance coverage to their employees. Recent findings indicate that from 2024 to 2025, the adoption of ICHRA plans has surged by 34% among businesses with more than 50 employees, according to the HRA Council.

Initially introduced in 2020, ICHRA allows employees to choose from a variety of health plans available through Affordable Care Act (ACA) exchanges, with part of the cost offset by their employer. This flexibility caters to the distinct healthcare needs of workers.

The Shift in Employer Health Insurance Trends

While ICHRAs are gaining traction primarily within small to mid-sized businesses, it's worth noting that the majority of ICHRA users are still small companies with fewer than 20 employees. These arrangements particularly benefit those businesses that haven’t previously offered health coverage, reversing a troubling trend.

Over the last two decades, small businesses offering health insurance have dropped from approximately 47% in 2000 to about 30% in 2023. This decline is largely attributed to rising costs of employer-sponsored insurance, making ICHRAs a more appealing choice.

The Impact on Employee Choice

ICHRA plans offer employees more control over their healthcare options, allowing them to select plans that best suit their individual circumstances rather than being limited to a few pre-selected choices.

This is particularly important for younger employees who typically enroll in ACA plans through ICHRA, as their participation can lead to healthier risk pools and more affordable marketplace plans overall. As more individuals opt into ICHRAs, the repercussions could enhance the sustainability of ACA-covered health insurance.

Bipartisan Support for ICHRA Initiatives

Interestingly, ICHRA has garnered bipartisan support, unlike many other healthcare initiatives during the previous administration.

With many recognizing the potential benefits of offering insurance flexibility to various segments of the workforce, ICHRA represents a promising pathway to ensuring that more Americans have access to necessary health coverage as Congress debates its future codification.