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ICHRAs enter the mainstream market with broker support

Most brokers are now actively recommending ICHRAs as an alternative to traditional employer-sponsored coverage as employers face double-digit medical cost growth.

Jacqueline LaPointe
By
Published: 27 May 2026

The appetite for individual coverage health reimbursement arrangements is growing, with more than half of brokers now actively recommending or implementing the nontraditional benefit structure.

That's according to SureCo's "2026 State of ICHRA Report," which surveyed 1,500 HR professionals, employees and benefit consultants. The report states that this is the year ICHRAs break free from the early-adopter phase and become a mainstream benefits strategy for employers.

ICHRAs are employer-funded health benefits that allow companies to provide tax-free reimbursements to employees so they can purchase individual health insurance plans and cover qualified medical expenses. They were introduced in 2020 to combat rising medical costs and provide more choice than traditional group health plans.

Many employers opted to offer ICHRAs to their staff, but adoption among all employers has been slow. Small businesses and those that previously did not offer any coverage at all have largely adopted the benefit structure to save money, but cost pressures are prompting mid- and large-sized companies to follow suit.

Only just recently have most brokers been active in advising the adoption of ICHRAs, according to the report.

The share of brokers who have shifted at least one client to an ICHRA has also nearly doubled over the past two years, reaching 37% by 2026.

The findings show that awareness is no longer an adoption challenge, the report stated, likely leading to greater adoption in the coming years.

Employees are also more willing to choose their own health plans, rather than select from a limited pool offered by their employers. The survey found that 83% of employee respondents said they would prefer to choose from all available plans in their area as long as their employer contributed toward coverage.

That sentiment also grew from 74% of employee respondents in 2024 to 88% in 2026.

Meanwhile, workers are pleased with the coverage ICHRAs provide. Nearly 90% with an ICHRA benefit said their coverage was better than under the plans their employer used to offer. Another 91% reported being satisfied with the benefit strategy overall.

Nearly the same percentage -- 91% -- of employers responding to the survey also said adopting an ICHRA was the right move for their business. Employers switching to an ICHRA saved an average of 15.5%, according to brokers responding to this year's survey.

Employer-sponsored group plans at a breaking point

The traditional employer-sponsored insurance system is at a breaking point, prompting more brokers and employers to shift to an ICHRA strategy, the report stated.

Medical expenses are skyrocketing, with individual costs expected to increase nearly 8% this year, according to the 2026 Milliman Medical Index.

Total costs for a typical person are estimated at around $ 8,460 this year, the highest cost spike in nearly a decade. Meanwhile, the average family of four's costs are projected to rise to $37,824.

Employers still cover most insurance costs, the Index report showed. This year, employers will sponsor about 58% of the expenses.

Unsurprisingly, nearly 90% of employers responding to SureCo's survey reported rate increases this year. One in three said they were double-digit increases, and about one in 10 reported increases of 15% or more.

As such, 94% of employers said they have explored at least one cost-containment strategy, such as an ICHRA. Other options included level funding, self-funding, reference-based pricing, captives and narrow network designs.

Brokers also see employers cracking under the financial pressures of healthcare. More than half reported that at least 30% of their clients need alternatives to traditional, fully-funded coverage.

Far from smooth sailing

ICHRA adoption could face major headwinds over the next couple of years as the industry deals with the fallout of the Affordable Care Act's individual marketplace.

Employees enrolled in an ICHRA benefit must choose an ACA-compliant health plan, often available on the ACA Marketplace. They can also go off-exchange and enroll directly with an insurance company or enroll in Medicare if they qualify.

But the majority going to the ACA Marketplace for coverage will see higher premiums and deductibles. KFF data released earlier this month found that premium payments for Marketplace enrollees recently grew by an average of 58% from $113 to $178 a month.

The average ACA Marketplace deductible also increased by 37% to a record high of $3,786, KFF reported. That means consumers who purchase coverage with lower premiums will still face higher costs through deductibles.

Researchers attributed the recent growth in Marketplace costs to the expiration of enhanced premium tax credits, which expanded federal subsidies for premium payments to more individuals.

ICHRA enrollees did not qualify for these enhanced premium tax credits, but their expiration is shaking up the ACA Marketplace.

Higher Marketplace costs and a shifting risk pool from declining enrollment would have some payers and employers rethinking ICHRA adoption.

Brokers, however, remain optimistic about the future of ICHRAs, with more than four in five who have engaged with an ICHRA expecting the current regulatory environment to support growth.

Jacqueline LaPointe is a graduate of Brandeis University and King's College London. She has been writing about healthcare finance and revenue cycle management since 2016.

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