ICHRA Offers Flexible Employer Coverage Amid Rising Premiums: Ben Light

Individual Coverage Health Reimbursement Arrangements (ICHRAs) may offer employers and employees a customizable health coverage alternative amidst rising premiums and as extended tax credits expire.

Health coverage premiums are expected to increase by a median of 18% in 2026 across 312 insurers participating in the Affordable Care Act (ACA) Marketplace, approximately 11% higher than last year.¹ Considering that extended tax credits are set to expire at the end of this year, employers and employees have much to consider when renewing their plans.¹ ICHRAs allow employers to set a flexible budget for employee health coverage reimbursements based on age, health status, and dependents. Employees also benefit because they can select their own ACA marketplace insurance that fits their health care needs and utilization.

An ICHRA may help subsidize health coverage costs for employers and employees should the extended tax credits expire.² Ben Light, vice president of partnerships at Zorro and expert in ICHRAs, discussed the benefits of ICHRAs for employers and employees in an interview with The American Journal of Managed Care^®.

“We see a lot of companies that are exploring the ICHRA because they've gotten a 20%, 25%, 40%, or 50% renewal on their traditional group plan,” Light said. “I think you're going to have people looking at the ICHRA because it's a shift of risk, and you're moving that risk from the population, just in your company now, out to the individual market.”²

Employers, should they choose to offer the ICHRA to their employees, set reimbursement budgets based on ACA marketplace index plans. Employees can then select the coverage plan that best suits their needs and, depending on their employer, are reimbursed in one of two ways. Standard ICHRA practice is when an employee chooses their plan, pays premiums up-front, and is then reimbursed by their employer. However, more ICHRA providers are enabling employers to pay for employees’ chosen plan and deduct the premium cost from employee income as if it were a standard health coverage plan.¹

Either option can result in lower costs for employers and employees, Light said.

This transcript was lightly edited. Captions are auto-generated.

Transcript

What makes the ICHRA model particularly attractive to employers facing rising premiums and tighter benefits budgets?

The ICHRA, a bad acronym, I know. A terrible sound to the word. People even say, “Ooh, it starts with ‘ick.’” But realistically, that's where we are right now. There is actually legislation to change the name. We'll see if that happens. We've now spent six years explaining ICHRA to people; we'll see if they make us change it.

The ICHRA puts an employer in a position where they have more control over the budget. In many explanations of the ICHRA, people describe it as the 401(k) of health insurance; rather than a defined benefit, it's a defined contribution. [For example], I'm saying to you as an employee, based on where you live, how old you are, and how many people are enrolling in coverage with you, you get a set amount of money, and then you get to purchase qualified ACA coverage.

To me, the real advantage of it for the employee is in the ability to right-size your coverage. If I'm someone who's young and healthy and I don't go to the doctor very often, but I work for an employer who offers me two different choices of traditional group insurance, and they're both more money than I want to spend and have richer benefits than I need, I'm stuck. I have to either have that insurance or nothing. Under the ICHRA, you have the ability to right-size that coverage to say, “I don't need to spend a lot on my premium.” I can take some of my money and, going back on my prior answer, put it in a [health savings account] or put it in a [flexible spending account] to save for a need that I might have.

From an employee perspective, I think it gives you the ability to right-size the coverage. You also—especially if you live in an area that's got a lot of different carriers—you have the ability to pick your carrier. There are still plenty of markets in this country where Kaiser Permanente is an option, and Kaiser Permanente is a closed HMO network, and people who have been on Kaiser often really like it. If your employer offers Kaiser and then they say, “Oh, it got too expensive; we're switching to United Healthcare,” you, all of a sudden, have lost the ability to go to Kaiser. But under the ICHRA, you have that choice again.

You can pick your insurance carrier as well as the size and richness of the plan. For the employee, it makes a ton of sense from a choice perspective, and for the employer, being able to get their arms around the budget and be a little more intentional about how they're allocating those dollars, rather than having to worry about the risk, makes a lot of sense for them.

Which types of organizations or industries are most likely to benefit from moving toward an ICHRA-based benefit structure?

There are 3 groups that generally come to mind. The first isn't an industry, but as I already mentioned, it's groups that have gotten those high renewals over and over and over again. We see a lot of people in hospitality, in home health care, and in a lot of blue-collar industries who have looked at ICHRA. Part of why ICHRA is attractive to these groups is that they have low enrollment numbers, so maybe 25 or 30% of their employees actually want coverage. And a traditional group plan doesn't want those groups because they assume adverse selection. They assume only the sickest people in the population are taking coverage, so the rates become very high, or a carrier says, “I don't even want to look at you. I won't give you coverage under the ICHRA, because everyone's enrolled in a plan individually; there's no minimum enrollment.”

If you go to United Healthcare and say, “Here's my company of 250 people. Only these 50 [people] want coverage.” United will probably say to you, “Thanks so much, but we're not going to offer coverage to your group. We're not going to quote you on the ICHRA.” Those 50 people get coverage. They enroll in the individual plans because they're not individually underwritten. They don't; the market doesn't look at their health to determine the cost of the plan. So those low-enrollment groups are a big target for the ICHRA.

The other thing that we see a lot with ICHRA is companies that have a geographically distributed workforce. Here we are in the modern work world. I'm sitting in my house, where I've now worked from home for 5 1/2 years. You might be as well. People are all over the place, and the idea of having one national plan that has to have everything in a network, where everyone lives, can be more expensive. If you get people on an ICHRA, all coverage is local. People can pick a plan that's local to them and has their local providers covered. That geographically distributed workforce, which could be tech companies or even large multinational companies that has people all over the place. The ICHRA makes sense for those groups.

References
1. Ortaliza J, Ortaliza J, McGough M, et al. How much and why ACA marketplace premiums are going up in 2026. Peterson-KFF Health System Tracker. August 6, 2025. Accessed December 5, 2025. https://www.healthsystemtracker.org/brief/how-much-and-why-aca-marketplace-premiums-are-going-up-in-2026/
2. McCrear S, Light B. What ACA subsidy expiration means for coverage costs, employer strategy, and ICHRAs: Q&A with Ben Light. AJMC. December 2, 2025. Accessed December 5, 2025. https://www.ajmc.com/view/what-aca-subsidy-expiration-means-for-coverage-costs-employer-strategy-and-ichras-q-a-with-ben-light