How ICHRAs put downward pressure on health plan costs

Individual coverage health reimbursement arrangements have remained a hot topic since their inception in 2020, sparking enthusiasm, debate and most importantly, adoption. Although many acknowledge that ICHRAs can significantly cut costs — often by 20% or more — some skeptics argue that they merely shifts expenses rather than driving meaningful change.

If viewed solely as a budgeting mechanism, this critique might hold weight. However, an ICHRA is far more than a cost-cutting exercise.

New data from the HRA Council’s 2025 Growth Trends Report shows how ICHRAs are transforming the individual market from the inside out — and why that matters for everyone, not only cost-conscious employers.

A younger, healthier risk pool is emerging

According to the report, individuals aged 18 to 44 now make up more than 50% of ICHRA and qualified small employer health reimbursement arrangement enrollees, marking the highest enrollment share for any age group.

These younger, generally lower-risk individuals are entering the market at higher rates than ever before. And as more healthy, working Americans obtain coverage through the Marketplace, the risk pool becomes increasingly balanced. This improved distribution of risk can stabilize pricing. In fact, recent insights from Oscar show it’s already driving down premiums year over year.

Dependent enrollment is expanding the market

Another powerful but less obvious trend is the rise in dependent enrollment on the individual market. The dependent-to-employee ratio reached 0.67 in 2025, putting ICHRA-based enrollment rates on par with traditional group plans. This means more spouses, children and other family members are gaining access to quality, Affordable Care Act-compliant coverage, further broadening the risk pool and decreasing average age.

Employee choice is raising the bar for carriers

Over the past year, concerns have grown around carrier practices, from claims denials to price transparency.

Under traditional employer-sponsored health care, employees have little say in their carrier selection. But with ICHRA, individuals gain that choice, forcing carriers to compete for their business.

In a benefits ecosystem long defined by legacy contracts, narrow plan menus, and ballooning costs, ICHRAs prove that consumer choice pushes real accountability and transformation. And if a carrier doesn’t deliver, employees can simply switch plans during open enrollment.

That kind of pressure is already forcing insurers to compete on service, transparency and value — something traditional group plans have failed to embrace.

Employees are right-sizing coverage

While there’s always chatter about the underinsured, it is equally important to acknowledge the challenge of the overinsured. Since most employers are beholden to just one carrier and a few plans, they often implement “just in case” coverage, effectively overinsuring a significant part of their population to ensure a small population is amply protected.

With ICHRAs, employees select the plan that fits their needs. They can choose providers, networks and benefit structures that align with their health and budget, not their coworker’s.

And contrary to concerns that employees will opt for the cheapest plans, the data shows the opposite: According to the HRA Council Report, nearly 70% of ICHRA enrollees choose gold or silver-tier plans. This further proves that employees demonstrate a strong ability to evaluate and select comprehensive coverage when given the tools to do so — and ensures they’re paying for what they need, not what their fellow employees want.

Carriers are tailoring ICHRAs for at-risk populations

Employers often struggle with “point solution fatigue,” adding costly, underused resources to their health plans to support high-risk populations. Within the ACA marketplace, insurers are beginning to create specialized plan options tailored to specific needs.

For example, Oscar now offers plans specifically designed for individuals managing type 1 or type 2 diabetes. This kind of personalization means employees with chronic conditions can access care better suited to their needs without requiring employers to pay for excessive point solutions or for an entire employee population to subsidize more robust plans.

A market-based reform that’s working

ICHRAs are more than a financial lever. It’s a market-based reform that’s driving better outcomes. By aligning incentives between employers, employees, and insurers, ICHRAs support a more balanced, efficient and transparent benefits ecosystem. It enables choice, encourages innovation and creates pressure for improvement in a market that desperately needs it.

And as more young, healthy individuals join the risk pool, more dependents get covered, and more employees select personalized, higher-value plans, ICHRAs’ impact will continue to expand well beyond cost savings.

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Ben Light is vice president of partnerships at Zorro. Contact him at [email protected].