A small, growing number of employers are putting health insurance decisions entirely in the hands of their workers.
Instead of offering traditional insurance, they’re giving workers money to buy their own coverage in what’s known as Individual Coverage Health Reimbursement Arrangements, or ICHRAs.
Advocates say this approach provides small companies that couldn’t afford insurance a chance to offer something. It also caps a growing expense for employers and fits conservative political goals of giving people more purchasing power over their coverage.
But ICHRAs place the risk for finding coverage on the employee, and they force them to do something many dislike: Shop for insurance.
“It’s maybe not perfect, but it’s solving a problem for a lot of people,” said Cynthia Cox, of the nonprofit KFF, which studies health care issues.
Here’s a closer look at how this approach to health insurance is evolving.
What’s an ICHRA?
Normally, U.S. employers offering health coverage will have one or two insurance options for workers through what’s known as a group plan. The employers then pick up most of the premium, or cost of coverage.
ICHRAs are different: Employers contribute to health insurance coverage, but the workers then pick their own insurance plans. The employers that use ICHRAs hire outside firms to help people make their coverage decisions.
ICHRAs were created during President Donald Trump’s first administration. Enrollment started slowly but has swelled in recent years.
What’s the big deal about ICHRAs?
They give business owners a predictable cost, and they save companies from having to make coverage decisions for employees.
“You have so many things you need to focus on as a business owner to just actually grow the business,” said Jeff Yuan, co-founder of the New York-based insurance startup Taro Health.
Small businesses, in particular, can be vulnerable to annual insurance cost spikes, especially if some employees have expensive medical conditions. But the ICHRA approach keeps the employer cost more predictable.
Yuan’s company bases its contributions on the employee’s age and how many people are covered under the plan. That means it may contribute anywhere from $400 to more than $2,000 monthly to an employee’s coverage.
How is this approach different?
ICHRAs let people pick from among dozens of options in an individual insurance market instead of just taking whatever their company offers.
That may give people a chance to find coverage more tailored to their needs. Some insurers, for instance, offer plans designed for people with diabetes.
And workers can keep the coverage if they leave — potentially for longer periods than they would be able to with traditional employer health insurance plans. They likely will have to pay the full premium, but keeping the coverage also means they won’t have to find a new plan that covers their doctors.
Mark Bertolini, CEO of the insurer Oscar Health, noted that most people change jobs several times.
“Insurance works best when it moves with the consumer,” said the executive, whose company is growing enrollment through ICHRAs in several states.
What are the drawbacks for employees?
Health insurance plans on the individual market tend to have narrower coverage networks than employer-sponsored coverage.
It may be challenging for patients who see several doctors to find one plan that covers them all.
People shopping for their own insurance can find coverage choices and terms like deductibles or coinsurance overwhelming. That makes it important for employers to provide help with plan selection.
The broker or technology platform setting up a company’s ICHRA generally does this by asking about their medical needs or if they have any surgeries planned in the coming year.
How many people get coverage this way?
There are no good numbers nationally that show how many people have coverage through an ICHRA or a separate program for companies with 50 workers or less.
However, the HRA Council, a trade association that promotes the arrangements, sees big growth. The council works with companies that help employers offer the ICHRAs. It studies growth in a sample of those businesses.
It says about 450,000 people were offered coverage through these arrangements this year. That’s up 50% from 2024. Council Executive Director Robin Paoli says the total market may be twice as large.
Still, these arrangements make up a sliver of employer-sponsored health coverage in the United States. About 154 million people were enrolled in coverage through work last year, according to KFF.
Will growth continue?
Several things could cause more employers to offer ICHRAs. As health care costs continue to climb, more companies may look to limit their exposure to the hit.
Some tax breaks and incentives that encourage the arrangements could wind up in a final version of the Republican tax bill currently under consideration in the Senate.
More people also will be eligible for the arrangements if extra government subsidies that help buy coverage on the Affordable Care Act’s individual marketplaces expire this year.
You can’t participate in an ICHRA if you are already getting a subsidy from the government, noted Brian Blase, a White House health policy adviser in the first Trump administration.
“The enhanced subsidies, they crowd out private financing,” he said.
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The Associated Press Health and Science Department receives support from the Howard Hughes Medical Institute’s Science and Educational Media Group. The AP is solely responsible for all content.
