The momentum of Individual Coverage Health Reimbursement Arrangements (ICHRAs) continues into 2025.
ICHRA is a modern health benefit solution that enables employers to reimburse employees for their health insurance premiums and other qualified medical expenses. Unlike traditional employer-sponsored health coverage, ICHRA allows businesses to set defined contributions, giving them greater control over costs while ensuring compliance with Minimal Essential Coverage (MEC) requirements.
Over the past year, ICHRA adoption has grown 84% among companies with 50 or more employees. With its flexibility and cost savings, ICHRA is reshaping how employers approach benefits and offering new opportunities for health plans to expand their individual market reach.
BenefitsPro identified four key trends shaping the future of ICHRA. These trends highlight critical opportunities for health plans to optimize offerings, drive membership growth, and enhance market positioning.
Here’s a closer look at these trends and how Softheon is supporting health plans as they navigate this evolving landscape.
1. Enhanced Plan Offerings for ICHRA Enrollees
In 2020, 74% of firms only offered one type of health plan to employees.
For most employees enrolled in traditional group coverage, the options are very limited, often trapping them in costly plans that don’t meet their or their family’s needs. ICHRA offers freedom of choice, allowing employers to reimburse employees for individual plans that best meet their personal and family health care needs. This autonomy allows employees to select plans that provide optimal coverage, leading to happier members.
As ICHRA adoption grows, the demand for diverse, tailored plan options continues to rise. Health plans are recognizing the opportunity to design offerings that cater specifically to ICHRA enrollees, ensuring affordability and competitive benefits.
Custom ICHRA plans shouldn’t scare health plans away; in fact, they replace the need for plan offerings specific to the needs of group purchasers. Instead of focusing on what employers want in their health coverage options, health plans should design plans with only the member in mind.
For example, Ambetter has expanded plan options optimized for ICHRA, enabling greater accessibility to personalized coverage. According to the HRA Council, 83% of ICHRA enrollees previously lacked insurance, presenting a significant opportunity for health plans to expand their market share while increasing access to care. By developing robust, flexible plans tailored to ICHRA participants, health plans can differentiate themselves and attract new members.
When designing ICHRA plan options, health plans should consider the different employer groupings designed by ICHRA. Think of the needs of seasonal and out-of-state workers who need wider provider networks. Employers can categorize their workforce into 11 different ICHRA classes:
2. Cost Savings and Improved Risk Pools
ICHRA offers a cost-effective alternative to traditional group plans, benefiting employers, employees, and insurers alike. By expanding ICHRA-eligible plan offerings, health plans can improve ACA risk pools, reduce adverse selection, and create pricing efficiencies.
Building a Larger and Healthier Member Base
By transitioning individuals from group coverage to Qualified Health Plans (QHPs), health plans are building a demographically younger and healthier member base. This helps to improve ACA risk pools and lower premium costs. According to the HRA Council, more than half of employees enrolled in HRAs are between the ages of 18-44. This younger and healthier membership can potentially improve ACA risk pools and lower healthcare costs and premium rates.
Data is still early in this emerging market. Health plans looking to invest in ICHRA are partnering with consultants and actuarial services to determine ICHRA’s low-term impact on risk pools.
Traditionally, younger generations have either been overlooked by employer-sponsored plans or priced out of subsidized coverage. To effectively cater to these often geographically dispersed members, health plans need to prioritize a strong provider network capable of supporting remote employees.
Stability and Long-Term Member Retention
One of the significant advantages of ICHRA is the stability it offers to members.
Unlike traditional employer-sponsored plans, ICHRA allows employees to maintain their health coverage even if they change jobs or experience employment disruptions. When transitioning from ICHRA funds to Advanced Premium Tax Credits (APTCs), members can continue their coverage without gaps, ensuring seamless access to healthcare. This continuity strengthens member trust and fosters long-term relationships with their health plans, ultimately leading to higher retention rates.
Simple ICHRA Administration
ICHRA simplifies plan administration for health insurers by eliminating the need to create employer-specific group plans. Since ICHRAs facilitate the purchase of QHPs, health plans can focus on optimizing individual market offerings rather than managing complex employer-specific designs.
Additionally, ICHRA administrators handle employer-provided funds and apply them directly toward employees’ health insurance premiums. This removes the burden from insurers of integrating with multiple funding sources and streamlines the premium payment process. Furthermore, since employees using ICHRA are generally not dual-eligible for APTCs, health plans can maintain clear financial structures without subsidy coordination complexities.
3. New Technology for Seamless ICHRA Integration
The success of ICHRA depends heavily on technology-driven solutions that streamline administration, compliance, and member engagement. Health plans need technology partners that facilitate seamless enrollment, automate processes, and ensure regulatory adherence.
By integrating directly with electronic data interchange (EDI) platforms, health plans can reduce manual processing, minimize errors, and enhance enrollment experiences for ICHRA participants. These capabilities enable insurers to scale their offerings efficiently while delivering a better member experience.
Beyond technical integration, successful adoption of ICHRA by health plans also depends heavily on building and maintaining strong partnerships with BenTech agencies and brokers. These relationships are crucial as they help navigate the complex landscape of health insurance, ensuring that ICHRA offerings are not only compliant but also competitive and well-positioned within the market.
For BenTechs looking to integrate with health plans, check out our sister company, W3LL.
4. Complex Compliance and Regulatory Requirements
While ICHRA simplifies many administrative aspects compared to traditional group plans, compliance remains key. Health plans must ensure their offerings align with ACA affordability thresholds—set at 9.02% by the IRS for 2025—to maintain regulatory compliance and avoid penalties.
ICHRA funds can reimburse coverage purchased both on and off the Exchange in all 50 states. However, federal premium subsidies available through the Federally Facilitated Marketplace (FFM) and State-Based Marketplaces (SBMs) cannot be used in combination with ICHRA funds. This restriction may limit some employees’ ability to access lower-cost health insurance options.
Because eligibility for Marketplace subsidies is determined by income, many employees utilizing ICHRA funds will not qualify for zero- or low-cost Marketplace plans. Health plans should consider these dynamics when designing and marketing ICHRA-compatible offerings to ensure broad accessibility while maintaining regulatory compliance.
Strategic technology partnerships enable health plans to navigate compliance challenges with ease. By leveraging automated affordability calculations, eligibility verification, and streamlined reporting, insurers can focus on delivering value while maintaining regulatory adherence.
Partnering for ICHRA Success
The evolving ICHRA landscape presents an opportunity for health plans to expand their individual market presence, drive enrollment growth, and optimize risk pools. However, success in this space requires the right technology and strategic approach.
Softheon supports health plans by providing seamless EDI integration, automated compliance solutions, and enhanced shopping and enrollment tools designed for ICHRA adoption. By eliminating administrative complexities and streamlining operations, Softheon enables insurers to focus on growth and innovation in the rapidly expanding ICHRA market.
Discover how Softheon can help your health plan navigate these ICHRA trends and lead in 2025. Contact us today!
SOURCE: Softheon
