So, how does this tie into healthcare? Individual coverage health reimbursement arrangements (ICHRA) are like the New Kids on the Block of health benefits programs. Authorized in 2020, ICHRA flew under the radar initially, but over time, it’s gained momentum, finding its own "right stuff."
The big question is whether ICHRA is destined to be a fleeting trend or a game-changer in health benefits for years to come. I have spent 20-plus years working in marketing and strategy with consumer-driven health plans (including reimbursement accounts), contributing to industry benefits publications and more. And I have been monitoring the evolution of ICHRAs since they were introduced in 2019. Let’s dive into what makes ICHRA worth watching.
What makes ICHRA an attractive option for employers?
ICHRA adoption is growing rapidly, especially among larger employers. According to HRA Council’s 2024 Growth Trends Report, ICHRA adoption was up 29% overall from 2023 to 2024 and a staggering 84% among large employers. Some key reasons include:
• Cost control: Employers can set contribution amounts independent of health plan rate increases.
• Risk mitigation: Moving from the group market to the individual market helps employers limit their risk, especially those with 100-plus employees, where experience-rated plans can lead to steep premium hikes.
What is ICHRA?
An individual coverage health reimbursement account, or ICHRA, is a defined-contribution benefit. Employers allocate funds to help employees buy individual health plan coverage and potentially cover other out-of-pocket medical expenses.
Instead of offering a traditional group health plan, the employer sets specific contribution amounts for different classes of employees (i.e., full-time, part-time, seasonal, hourly and salaried). The employee obtains individual coverage and receives employer funds to pay toward premiums. If the employee has extra funds available after paying premiums, they may be able to use the funds to offset other qualified out-of-pocket medical expenses.