A growing number of employers are considering Individual Coverage Health Reimbursement Arrangements, or ICHRAs, instead of traditional group health plans. Concerns about the Affordable Care Act marketplaces are slowing their decision, according to a recent survey.
The findings, released Tuesday by the Employee Benefit Research Institute and Morgan Health, showed that over one-third of employers are either planning or evaluating ICHRAs. These arrangements let companies reimburse employees for buying their own insurance on the ACA exchanges rather than providing a company-wide plan. Only 11% are actively moving toward implementation, indicating strong hesitation remains.
Costs and worker satisfaction top concerns
Affordability is the biggest worry. About 85% of large companies and 80% of small employers said they were concerned individual market premiums might be too high for their workers. Out-of-pocket expenses also raised alarms, with more than 80% of both large and small firms expressing unease.
Plan availability is another issue. Nearly 80% of large employers and almost 70% of small companies feared limited insurer participation in their area if they switched to ICHRAs. Some workers might end up with fewer options—or none—depending on location.
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Employee preference adds to the challenge. Forty-three percent of large businesses said their workers preferred group health plans, while nearly half of small companies offering coverage reported the same. Moving to individual market plans could face resistance if employees feel they are losing valued benefits.
Interest high, but adoption lags
Interest in ICHRAs has increased since the Trump administration introduced them six years ago. Employers see flexibility, more employee choice, and potential savings as key benefits. The survey, which included nearly 1,000 benefits decision-makers, found 36% of large employers—those with over 100 workers—were very likely to adopt ICHRAs in the next two years. Smaller employers showed less enthusiasm, with just 23% expressing strong interest.
Many employers still lack clarity about how ICHRAs function. They also worry about administrative and legal complexities, which could be especially difficult for smaller businesses with limited HR resources.
Policy changes could encourage adoption. Nearly 90% of employers said they would be more likely to use ICHRAs if they could ensure the same network quality and choice as group plans. About three-quarters said a recommendation from their broker, benefits consultant, or a peer business would make them more inclined to switch.
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Recent changes in the ACA marketplace have added to caution. Expanded financial assistance for ACA plans ended last year, leading to higher premiums for some enrollees. Some workers dropped coverage or chose less expensive plans with fewer benefits, sparking concerns that ICHRAs might leave employees in a worse position.
For now, most employers remain hesitant. While ICHRAs could help control costs and offer more plan options, uncertainties in the individual market keep many from committing.
If the ACA exchanges become more stable and premiums grow more predictable, adoption may rise. Until then, employers appear content to observe rather than act.
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