By Michael Reagan, CBPA – October 10, 2026
Remember when health benefits were simple? You picked a carrier, hoped the renewal didn’t make you cry, and spent the rest of the year explaining why Brenda in accounting still can’t find an in-network dermatologist. Those days are mostly gone.
According to the 2025 KFF survey, the average family premium hit $26,993—up 6% in a single year. That’s not a raise. That’s a quiet mugging that happens every renewal season.
Traditional group plans are the original defined-benefit arrangement: you promise employees a specific plan, then spend the next twelve months absorbing whatever the carrier decides your claims experience and “market conditions” are worth. An ICHRA (Individual Coverage Health Reimbursement Arrangement) flips it to defined contribution. You set a fixed monthly allowance. Employees shop the individual market for a plan that actually fits their doctors, prescriptions, and zip code. You reimburse them tax-free up to the amount you chose.
It’s the 401(k) of health benefits—except instead of asking people to become amateur stock pickers, you’re asking them to become slightly less amateur insurance shoppers. Progress.
You Stop Playing Renewal Roulette
With a traditional plan, one unexpected claim or a tough market can turn your carefully budgeted benefits line into a surprise math problem. With an ICHRA you decide the number in advance. That number does not automatically grow because someone on your team had a complicated year or because the carrier felt like raising rates. You control the dial. They don’t.
Employees get real choice—often dozens of plans instead of the one or two you selected after three soul-crushing carrier meetings. They can prioritize their preferred network or the specialist their kid actually needs. There are also no “75% of employees must enroll or the plan collapses” rules, which is convenient if half your team is already covered on a spouse’s plan or works from three different states.
The Fiduciary Plot Twist
Here’s where it gets interesting for anyone who has ever stayed up wondering whether they were personally on the hook for something a carrier or TPA did.
A traditional group health plan makes you a fiduciary with a reasonably long list of duties: selecting and monitoring carriers, watching fees, overseeing claims processes, and generally acting prudently on behalf of participants. Recent years have featured more lawsuits and enforcement attention on exactly these issues. It’s not the most relaxing part of the job.
An ICHRA is still an ERISA plan for most private employers, so you don’t get a full hall pass. You still need a proper plan document, a Summary Plan Description, prudent administration of the reimbursements, required notices, and solid processes. You remain responsible for running the HRA correctly.
The difference is scope. Regulatory safe harbors generally keep the individual policies employees buy outside your ERISA plan—as long as you don’t pick or endorse specific carriers, participation stays voluntary, you don’t take money tied to their choice, and you give the annual notice that the coverage itself isn’t subject to ERISA. In plain English: you stop being the person who chose the network and the plan design that someone is now unhappy with. Employees own their policies. Your fiduciary job shrinks from “manage an entire group insurance product” to “run a defined-contribution reimbursement program properly.”
(This is not legal advice. Actual plan design and safe-harbor compliance should be reviewed by people who went to law school on purpose.)
The Fine Print That Isn’t Funny
ICHRA isn’t automatically cheaper on day one. Individual-market rates can be higher than group rates in some places, and employees who accept an affordable ICHRA generally can’t also take premium tax credits. They also have to pick their own plan, which some people find empowering and others find approximately as fun as doing their own taxes. Good administration platforms and decision-support tools help, but the responsibility still shifts.
It tends to work best when renewals have become painful, the workforce is spread out, you want a number you can actually budget, or you’d simply like to spend less time in the carrier-selection business.
The Short Version
Switching from a defined-benefit group plan to an ICHRA doesn’t mean you stopped caring about health benefits. It means you decided the old model—where you absorb the risk, choose the plan, and carry broader fiduciary exposure—no longer fits how your company or your people actually work. You set the contribution. Employees choose the coverage. You keep tax advantages and, for larger employers, a path to satisfying the ACA mandate when the offer is affordable.
With family premiums already knocking on $27,000 and little reason to expect the trend to reverse, a lot of employers are asking whether they’d rather keep playing renewal roulette or just pick a number and stick to it. The ICHRA model has moved past “interesting idea” into “a lot of companies of every size are already doing this.” The only real question is whether the trade-offs make sense for yours.Top of Form
Senior Content Strategist * Executive Communications & Healthcare/Benefits Content * Co‑Founder of Benefit Fixes LLC * Published legal thriller author exploring ethics, faith & high‑stakes decisions