ICHRA opportunities, tradeoffs, and what’s next

As healthcare costs continue to pressure traditional group plans, more U.S. employers are taking a serious look at Individual Coverage Health Reimbursement Arrangements (ICHRAs) as an alternative way to offer health benefits. But while momentum is building, ICHRAs may not be a fit for every workplace.

If you’re evaluating an ICHRA, assess how its potential advantages and tradeoffs may influence your benefits strategy and broader workforce outcomes.

The current state of ICHRAs

Adoption of ICHRAs continues to accelerate. According to the HRA Council’s 2025 Growth Trends report, ICHRA adoption among employers with 50 or more full‑time employees grew 34% from 2024 to 2025, with some mid‑size employer segments seeing growth as high as 49% year over year. Small employers are also driving expansion with 17% transitioning to ICHRA use from traditional group insurance.

At the same time, traditional group coverage is getting more expensive. According to the KFF 2025 Employer Health Benefits Survey average employer‑sponsored family premiums reached $26,993 in 2025, up 6% year over year, with employee contributions continuing to rise alongside those premiums. This sustained cost pressure is one of the main reasons employers are reconsidering how they fund health benefits.

Potential benefits for employers

For employers, ICHRAs offer several potential advantages that can reshape how benefits are structured and delivered.

Cost predictability

With an ICHRA, employers set a defined contribution for employees to purchase health insurance from the individual market. That shift can make benefits budgeting more stable, especially for growing or geographically dispersed workforces.

Employee choice

Employees use the employer‑provided funds to select ACA‑compliant individual plans that fit their health needs. Last year, nearly 70% of employees using ICHRAs selected silver or gold marketplace plans, suggesting employees are not just choosing bare‑bones coverage.

Expanded access

Because ICHRAs can be offered by employers of any size, they’ve opened the door for organizations that previously struggled to afford traditional group health plans. This approach allows more employers to offer coverage in a way that fits their budget, without forcing every employee into the same plan design.

Potential drawbacks

Alongside these advantages, ICHRAs also come with several considerations that can impact cost, employee experience, and compliance if not thoughtfully managed.

The individual market matters

ICHRAs rely on a stable and affordable ACA marketplace where individuals can access coverage. However, enhanced ACA subsidies, which significantly improved affordability, expired at the end of 2025 and pushed premiums higher, making costs more expensive. In fact, a Silver health insurance plan from the ACA market now costs an average of $752 a month, a 21% increase over 2025.

Employee experience

While many workers value choice, others can find shopping for health insurance coverage confusing, especially without strong decision support. So, employers that don’t pair ICHRAs with education and navigation tools may see frustration among employees instead of engagement.

Compliance and affordability rules

Employers subject to the ACA employer mandate must ensure ICHRAs meet affordability standards for each employee class. Poor plan design can create compliance exposure or leave gaps employees don’t discover until enrollment.

How The Baldwin Group can help

ICHRAs can be effective, but only when they’re designed, supported, and monitored with intention. Advisors at The Baldwin Group help employers evaluate whether an ICHRA makes sense and, if so, implement it in a way that can work for their organization and their employees with:

• Thoughtful strategy and plan design – We can help employers assess ICHRAs alongside traditional and hybrid options, then design contribution levels and employee classes that align with workforce demographics, geography, and budget goals.
• Built‑in compliance and affordability support – From ACA affordability modeling for Applicable Large Employers (ALE) to required notices and documentation, our team specializes in the details, including compliance, communications, leave, pharmacy, and data analytics. This way your design stands up at renewal and during audits alike.
• Employee experience and education – Choice only works when employees understand it. So we support enrollment education and decision tools so employees can confidently select individual coverage, reducing confusion and HR burden.
• National reach with local market insight – Individual plan availability varies by state. With a national footprint and local expertise, we help employers anticipate where ICHRAs will work well and where adjustments may be needed.
• Technology‑enabled, ongoing advisory support – Through The Baldwin Group’s platforms and guidance, employers gain visibility into administration, eligibility, and compliance, with support that adapts as markets, regulations, and workforce needs evolve. Transparent pricing means no surprises, just a clear understanding of what you’re paying for.
• Access when it matters – Direct access to experienced specialists and senior leaders helps streamline decision-making and keep benefits strategies aligned with business objectives.

Let’s discuss what an effective health benefits strategy for your employees looks like.