ICHRA Growth Surged Almost 30% Since 2023

A new report by the HRA Council found that U.S. employers’ adoption of individual coverage health reimbursement arrangements (ICHRAs) increased 29% between 2023 and 2024.

ICHRAs allow organizations to offer employees a monthly allowance of tax-free money so they can buy health care services that fit their unique needs. This can help control costs and address compliance with the Affordable Care Act (ACA). As a result, ICHRA usage is increasing as more plan sponsors consider ways to control costs around health benefits.

“ICHRAs/QSEHRAs already show high retention rates and ‘stickiness,’ underscoring their sustainability as benefits solutions that deliver both employer and employee satisfaction.”

HRA Council report, volume 3 (2023-24)

Consider these key findings from the report:

• ICHRAs grew 84% among applicable large employers (ALEs).
• Most (83%) of employers surveyed could not offer health benefits until they offered an ICHRA or Qualified Small Employer HRA (QSEHRA). Seventeen percent of employers switched from traditional group coverage to an ICHRA.
• The number of employees offered a defined contribution health benefit now exceeds 200,000, which does not include dependents—some estimates have said more than 500,000 people are enrolled.
• More than half (60%) of employees choose ACA Gold and Silver plans.
• The top metros for ICHRA adoption are New York City, Atlanta, Los Angeles, the San Francisco Bay Area and the Twin Cities (Minnesota).

The HRA Council anticipates more ICHRA growth in the coming years, given the benefit’s flexibility and increasing uptake for ALEs.

Employer Takeaway

Traditional group health insurance may not be flexible enough to meet the unique needs of today’s diverse workforce. With ICHRAs, employers of all sizes can offer a defined monthly allowance for employees to spend on individual health insurance plans and out-of-pocket medical expenses, including prescription drugs, doctor visits and more. Employers can also vary the benefits by offering different allowance amounts based on job-based criteria (e.g., full-time, part-time and seasonal workers).

Employers should continue to monitor trends to make the right employee benefits decisions for their respective organizations and employees.

Contact us today for more information.