New data from HealthSherpa shows that an estimated 400,000 to 800,000 U.S. residents are using individual coverage health reimbursement arrangements (ICHRAs) to pay for their health insurance in 2025, 2.8 times more than last year. HealthSherpa, which supported about one-third of Affordable Care Act exchange enrollments this year, expects participation in ICHRAs and similar arrangements, such as Qualified Small Employer HRAs, could triple again by 2027.
Overview of ICHRAs
A health reimbursement arrangement (HRA) is an employer-funded, account-based group health plan that reimburses employees for eligible medical expenses, up to a set annual limit, on a tax-advantaged basis. An ICHRA gives employers a flexible way to control health benefit costs by offering employees a monthly allowance of tax-free reimbursements to purchase coverage that fits their needs. Employers can choose whether an ICHRA reimburses all medical expenses, premiums only, nonpremium expenses (such as cost sharing) only, or a defined list of eligible services.
Most employers use ICHRAs to reimburse individual health insurance or Medicare premiums (including Parts A, B, C, D and Medigap). ICHRAs also allow employers to set eligibility by employee class (for example, full-time, part-time or seasonal), which can be especially useful for organizations with diverse workforces. However, employers cannot offer an employee a choice between an ICHRA and a traditional group health plan.
Employer Takeaways
As a flexible alternative to traditional group health insurance, more employers are adopting ICHRAs to meet the diverse needs of today’s workforce. Employers should continue to monitor trends to make informed decisions for their organizations and employees. Download the bulletin for more details.
