ICHRA in 2026: Employers Are Handing Plan Choice to Their Employees

How do ICHRAs work?

An Individual Coverage Health Reimbursement Arrangement (ICHRA) lets an employer put tax-free dollars toward an employee’s individual health insurance instead of sponsoring a group plan.Treasury, Labor, and the Department of Health and Human Services issued the rule jointly in June 2019, and it took effect for plan years beginning on or after January 1, 2020. Employers of any size can offer one.

Instead of selecting Plan A or Plan B on behalf of a workforce, the employer sets an fixed allowance and eligible employees buy individual-market coverage that fits their household, their physicians, and the care they expect to need.

• Federal rules impose no minimum or maximum on allowance.
• Employers offer an ICHRA to only some employee classes (e.g. full-time, with a certain state, etc.) while keeping a group plan for others. But employees within a class cannot choose between the two.
• Employers may choose to offer affordable plans, which set a threshold on how much employees are required to contribute to the lowest-cost, self-only Silver plan. In 2026, the maximum threshold for an affordable plan was 9.96% of household income.
• Employees with an affordable offer generally cannot also claim Marketplace premium tax credits.

Although ICHRAs make it easy for employers to set caps on spending, contribution levels, class definitions, affordability math, enrollment support, and local individual-market conditions all determine whether the benefit lands well. And employees now face the question the benefits department used to answer for them: which plan do I choose?

Which employers are adopting ICHRAs?

The HRA Council released Volume 5 of its ICHRA and QSEHRA growth report on August 12, 2026, aggregating anonymized, record-level enrollment data from 17 member platforms as of January 31, 2026. Within the dataset, more than 20,000 US businesses offered an ICHRA or a QSEHRA in 2026 covering more than 500,000 employees, but total adoption is likely higher.

Large employers are the fastest-growing segment in the report, when previously ICHRAs were seen as a small-business solution.

More than two-thirds of small businesses offering an ICHRA previously offered no health coverage at all, and nearly a third of small ICHRA adopters came out of the small group market.

Why do employers choose to offer ICHRAs?

The economic case for ICHRAs is straightforward: employers can replace an unpredictable annual health-plan renewal with a defined contribution they control. The pressure behind that case is well documented, and the Wall Street Journal’s U.S. Workers Are Paying More for Healthcare, and Next Year Will Be Worse traces how much of that rising cost employers are already passing to their employees, with more of it queued for next year. But cost certainty alone does not appear to be enough to drive adoption. The EBRI-Morgan Health Employer ICHRA Survey found that just over one-third of employers already offering health benefits were actively planning or evaluating an ICHRA. Another 11% were working towards an implementation.

Of the remaining 89% of employers still evaluating ICHRAs, benefits groups citedconcerns including employee out-of-pocket exposure, limited plan availability, or preferred keeping current group health plan.

When EBRI tested what would make employers more likely to adopt ICHRAs, the strongest response was high provider network quality: 89% said they would be more likely to move if they could expect the same quality of provider networks and plan choice a group plan delivers. Broker recommendation (77%) and peer adoption (76%) followed.

Employers want to know whether their workers will still be able to get good care, and they raise that question before they raise savings.

What plans do employees choose with ICHRA coverage?

While there is hesitation on the employer side, employees are eagerly adopting ICHRA plans. The employee behavior in the HRA Council data provides additional insight into new market dynamics.

• More than half of ICHRA enrollments were made by employees under the age of 45
• Employees chose Silver and Gold plans more than any other metal tier
• The median employer allowance was $459 a month, while employees selected plans with a median premium of $567 (paying ~$100 out of pocket)

The worry has always been that a fixed allowance invites employees to buy down, accepting thinner coverage year after year as medical inflation outruns the employer’s contribution. The early data shows the opposite behavior at the median, with employees spending their own money to reach the coverage they want.

A functioning consumer market is supposed to produce exactly that spread. One employee prioritizes the low monthly premium. Another pays more for a broader network. A family anticipating a pregnancy values richer coverage; someone managing diabetes cares far more about specialists, medications, and how the plan performs on chronic care.

But pricey plans rarely mean reliable delivery of high-quality care.As consumers become more involved in health plan selection, the demand to improve provider and network quality will only increase.

In Part 2, we'll discuss how health plans are responding to the new wave of consumer market spend that ICHRA brings - who is innovating in the ICHRA space, what transparency in healthcare looks like for consumers, and how your organization can stay ahead of costs and complaints.

Sources

• Departments of the Treasury, Labor, and Health and Human Services, “Health Reimbursement Arrangements and Other Account-Based Group Health Plans,” 84 FR 28888 (June 20, 2019): the final rule creating the ICHRA, effective for plan years beginning on or after January 1, 2020. federalregister.gov
• HealthCare.gov, “Individual Coverage Health Reimbursement Arrangements,” and Norris, healthinsurance.org (2026): employer eligibility, absence of contribution minimums and maximums, employee class rules, the prohibition on offering a class a choice between group coverage and an ICHRA, and the 9.96% affordability threshold for 2026 (9.02% for 2025). healthcare.gov
• HRA Council, “Growth Trends for ICHRA & QSEHRA,” Volume 5 (August 12, 2026): 20,000+ businesses, 500,000+ covered lives, 17 contributing member platforms, data as of January 31, 2026, the under-45 enrollment share, metal tier selection, and small-employer coverage history. prnewswire.com
• Fierce Healthcare (2026), reporting HRA Council data: the 6,600 to 12,700 employer count, the 109% growth among employers with 500 to 999 employees and 178% above 1,000, and the $459 median allowance against a $567 median selected premium. fiercehealthcare.com
• EBRI and Morgan Health, “2026 EBRI-Morgan Health Employer ICHRA Survey” (July 2026): the 62% likelihood among employers with 100 or more employees, the 11% actively implementing, the 89% network-quality result, broker and peer influence, and the affordability, out-of-pocket, plan availability, and worker preference barriers. ebri.org
• Mercer, “2025 National Survey of Employer-Sponsored Health Plans” (November 2025, n=2,010) and “Wondering if ICHRAs have a role in your program” (September 2025): 6.0% cost growth to $17,496 per employee in 2025, the 6.7% projection above $18,500 for 2026, the 3% and 6% replacement likelihood by employer size, and the EBRI estimate of 350,000 to 700,000 covered workers and dependents. mercer.com
• The Wall Street Journal, U.S. Workers Are Paying More for Healthcare, and Next Year Will Be Worse: the shift of health-benefit cost from employers onto employees, and the further increases expected next year. Subscription required.
• KFF, “How Has ACA Marketplace Enrollment Changed Across States in 2026?” (July 28, 2026) and “ACA Marketplace Enrollment Is Down After Big Jump in Premium Payments” (June 29, 2026): 19.2 million February 2026 effectuated enrollment against 21.8 million in 2025, the 12% decline, the 90% to 83% effectuation rate change, the 58% increase in net premium payments, and the 26% average premium increase. kff.org
• Healthcare Dive, Brady, “ICHRAs, a growth opportunity for insurers, face uphill battle” (April 8, 2026): fully insured group enrollment decline from 2013 to 2023, the carriers marketing ICHRA, and the adoption hurdles. healthcaredive.com
• Centene, “Centene Corporation Names First President over ICHRA Business” (January 9, 2025) and Ambetter Health Solutions product page: the dedicated president role, the Sarah London statement, the 13-state off-exchange footprint, and the employer and employee value propositions. centene.com
• Oscar Health, “Hy-Vee Health and Oscar Serve Up a New Era of Employer Healthcare” (August 14, 2025): the Des Moines ICHRA product, the included care and navigation benefits, the savings claims, and the stated intent to expand to additional markets. hioscar.com
• Oliver Wyman, Burke, Vichare, and Mar, “Emerging Health Reimbursement Accounts May Disrupt Insurers” (January 2024): the disrupt-or-defend framing for carriers and the Centene estimate that up to 45% of the employer group market could be disrupted through ICHRA growth. oliverwyman.com
• Georgetown University Center on Health Insurance Reforms, Rakine, “Insurers Eye ICHRAs: Implications For the Small Group and Individual Markets” (July 17, 2024): the adverse selection dynamic between level-funded arrangements, the small group market, and community-rated individual coverage. chir.georgetown.edu
• HealthSherpa estimates reported by Christensen Group (February 6, 2026): 400,000 to 800,000 people using ICHRA funds for coverage in 2026, roughly 2.8 times the prior year. christensengroup.com