The employer-sponsored health benefits market is changing. The individual coverage health reimbursement arrangement (ICHRA) entered the market in 2020 and has reshaped how employers, brokers, and insurance carriers approach health benefits.
2024 was a banner year for ICHRA, with surging adoption, rising investor interest, and a shifting benefits landscape. But how exactly has the ICHRA grown, and what does this mean for 2025? In this article, we’ll take a closer look at the growth of the individual coverage HRA.
In this blog post, you’ll learn:
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- What the ICHRA is, and its history
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- How ICHRA has grown in recent years
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- How PeopleKeep and Remodel Health can help employers and brokers offer an ICHRA solution
Overview of ICHRA and its history
First, let’s review what the individual coverage HRA is. The ICHRA is an employer-funded health benefit that allows employers to provide a tax-free allowance for qualified medical expenses. This includes individual health insurance premiums.
By offering an ICHRA, employers of all sizes can break free from traditional group health insurance and self-funded plans. Instead, they can offer a defined contribution that fits their budget. This gives employers cost predictability, as they’ll never spend more than the allowance they offer to each employee. There are no minimum participation requirements, so even small businesses can offer the benefit.
The ICHRA also benefits employees. With a group plan, employees can get stuck with plan options they didn’t pick. Their preferred doctors may be out of network, or they may have limited provider options based on location. With an ICHRA, employees have the freedom to choose the qualifying individual health insurance plans that work best for their needs.
History of ICHRA
But, the ICHRA hasn’t always been an option for employers. Before IRS Notice 2013-54, which clarified Affordable Care Act (ACA) guidance,1, any organization could offer an HRA that integrated with individual health insurance plans. Early HRA vendors included Zane Benefits, which later became PeopleKeep, part of Remodel Health.
After a challenging three years of businesses looking for alternatives to group health insurance, Congress created the qualified small employer HRA (QSEHRA) in 2016. This allowed small businesses to once again offer an HRA that integrates with individual health insurance. However, only organizations with fewer than 50 full-time equivalent employees (FTEs) can offer a QSEHRA. This meant stand-alone HRAs were still out of reach for applicable large employers (ALEs).
In 2017, President Donald Trump instructed the Departments of the Treasury, Labor, and Health and Human Services to expand HRAs. The Departments introduced the ICHRA in 2018 and finalized the rules in 2019. The ICHRA became available in 2020, giving large employers a way to provide a cost-effective and flexible health benefit to employees.
Remodel Health’s PeopleKeep product was the first ICHRA administration solution on the market in 2019 in preparation for the benefit’s launch on January 1 of the next year. Since then, Remodel Health has seen the growth of ICHRA first-hand.
The growth of ICHRA
The ICHRA has seen rapid growth since becoming available in 2020. According to the HRA Council2, of which Remodel Health is a member, ICHRA adoption grew 29% between 2023 and 2024. ICHRAs are growing fastest with ALEs, with 84% growth between 2023 and 2024. This is bringing even more employees onto the individual market.
Based only on HRA Council member data, the number of employees offered a QSEHRA or ICHRA has grown over four times between 2020 and 2024. As of 2024, the HRA Council estimates there are more than half a million employees with an ICHRA.
Interest in ICHRA is also growing. According to Google Trends, which shows interest in a search term in the U.S. over time, ICHRA hit its peak popularity among Googlers in November 2024. ICHRA had almost double the search interest of the previous peak in November 2023. Interest peaked on Google for the term “individual coverage HRA” in December 2024.
This data shows that more employers and brokers are becoming interested in ICHRA and are seeking knowledge and solutions. How has this played out? With increases in employers offering an ICHRA and substantial investments in ICHRA vendors.
Recent investments in ICHRA vendors propel the industry forward
Investors are taking note of the growth of ICHRA. Major funding rounds and acquisitions in the space signal strong market confidence in the future of ICHRA. Multiple ICHRA administration platforms saw investments in 2023 and 2024. Companies offering innovative ICHRA solutions have attracted private equity partnerships aimed at improving the user experience and expanding market reach.
Some recent ICHRA investments include the following:
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- Remodel Health
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- Funding amount: $100 million+
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- When: December 2024
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- Investors: Oak HC/FT and Hercules Capital
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- Remodel Health
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- StretchDollar3
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- Funding amount: $6 million
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- Date: December 2024
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- Investors: Oscar Health and Fika Ventures
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- StretchDollar3
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- Thatch4
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- Funding amount: $38 million
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- Date: September 2024
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- Investors: Index Ventures, General Catalyst, Andreessen Horowitz (a16z),
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- Thatch4
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- Venteur Health5
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- Funding amount: $7.6 million
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- Date: 2024
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- Investors: GSR Ventures, Headwater VC, Revelry Venture Partners, Houghton Street Ventures, Plug and Play, Techstars, and CRCM Ventures
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- Venteur Health5
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- Gravie6
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- Funding amount: $179 million
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- Date: March 2023
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- Investors: General Atlantic, FirstMark Capital, and AXA Venture Partners
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- Gravie6
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- Take Command Health7
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- Funding amount: $25 million
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- Date: September 2023
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- Investors: Edison Partners, LiveOak Venture Partners, and SJF Ventures
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- Take Command Health7
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- Zorro8
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- Funding amount: $11.5 million
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- Date: March 2023
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- Investors: Pintago and 10D
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- Zorro8
What is driving ICHRA’s growth?
The majority (83%) of new ICHRA adopters didn’t previously offer health benefits. This signals that ICHRA is filling a critical gap. Small businesses find the flexibility of the ICHRA beneficial, as traditional group plans are unaffordable to many small employers. Now they can offer a competitive health benefit within their budget.
Because small businesses can better manage their budgets with an ICHRA, they no longer have to forgo offering a benefit.
The remaining 17% switched from traditional group coverage to the ICHRA. Fully-insured group plans can have steep annual rate increases, so even if an employer can offer a group plan now, they might not be able to in the future. These premium increases have led to organizations switching to an ICHRA for budget control.
According to KFF, the average employer-sponsored health insurance premiums in 2024 are:9
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- $8,951 per year for single coverage ($9,131 for small businesses)
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- $25,572 per year for family coverage ($25,167 for small businesses)
In many states, individual health insurance premiums are cheaper than small group health insurance premiums. This means that if employers already cover 70-80% of employees’ group premiums, they can get substantial savings by reimbursing employees for their individual health plans.
The places below exemplify how much cheaper individual coverage can be compared to small group plans in 2025 (source: Ideon10):
Healthcare is also becoming more expensive. As a result, those with self-insured plans are taking on more financial risk than ever before. Switching to an ICHRA can reduce an organization’s risk.
The ICHRA also provides tons of flexibility for employers facing different situations. For example, organizations with remote employees or a multi-state workforce can find it challenging to offer group health insurance. This is because most plans don’t work in multiple states, or employees might face limited network availability. With an ICHRA, employees can choose a plan that works for them no matter where they live.
The insurance industry is also adapting to ICHRA’s growth. Carriers like Oscar Health are expanding individual plan offerings and ICHRA support.11 Brokers are also shifting from traditional group consulting to partnering with ICHRA administrators.
Finally, the rise in healthcare consumerism is playing a major role in the rise of ICHRA. Employees want better benefits. And, they’re more willing to get involved with their health benefits to ensure they’re getting the best coverage possible.
What to expect with ICHRA in 2025
With the ongoing success of ICHRA and recent investments in ICHRA vendors, 2025 is poised to be a year of growth. Given high retention rates and previous growth, especially among larger employers, the number of employees with an ICHRA will continue to grow exponentially.
There will also likely be more investments in ICHRA vendors, and new administration platforms are likely to pop up. Additionally, insurance carriers continue to show interest in ICHRA. As insurers recognize the growing demand for individual plans, expanded options may appear.
Congress may also consider codifying ICHRA into law. President Donald Trump initiated the creation of the ICHRA through an executive order, not legislation. Former President Joe Biden kept the ICHRA intact, signaling that there’s some level of bipartisan support for its benefits.
Congress attempted to codify ICHRA into law through the CHOICE Arrangement Act12 in 2023. But, it stalled in the Senate after passing the House. With a new Congress and presidential administration, lawmakers are already considering the future of the ICHRA. The House Ways & Means Committee recently asked for comments13 on the ICHRA. We’ll keep an eye on this renewed effort.
Challenges with ICHRA
One challenge to the growth of ICHRA is misconceptions. Some organizations believe the ICHRA allows employers to discriminate against older or unhealthy workers. The idea is that employers push these workers onto the individual ACA market, thereby creating a higher risk pool and raising costs. Then, they offer a traditional group plan to other employees.
In reality, the HRA Council found that ICHRA is bringing younger workers into the ACA markets. This helps stabilize the risk pools and lower costs. You can also only differ benefit eligibility by employee classes. This means employers can’t single out workers. Classes must align to job-based criteria, such as full-time or part-time.
Many large employers may also view the ICHRA as a solution for small businesses. However, the ICHRA can work great for ALEs, as seen by the recent growth in this size segment.
Another challenge for the ICHRA is the individual market itself. Most employees with a group plan are familiar with preferred provider organizations (PPOs). These types of plans cover some out-of-network costs and don’t need referrals to see specialists. However, most individual plans are health maintenance organizations (HMOs) or exclusive provider organizations (EPOs). These plans have narrower networks and don’t often cover out-of-network costs at all. This may make employers and employees hesitate to switch to an individual plan.
Employees and employers also aren’t familiar with ICHRAs. Education and awareness continue to be important, as many employers haven’t heard of the benefit before. There can also be a steep learning curve to managing and using the ICHRA. Employees need to learn how to submit reimbursement requests and what expenses are eligible. They’ll also need to shop for individual plans, many for the first time.
To ease this transition, ICHRA vendors and brokers are enhancing support with guided plan selection tools and education resources. Thankfully, Remodel Health can help brokers, employers, and their employees navigate these new benefits.
Remodel Health is at the forefront of ICHRA’s growth
The rise of ICHRA is transforming the way organizations approach health benefits. It offers greater flexibility, cost control, and personalized coverage than traditional health benefits. At Remodel Health, we’re leading this transformation by revolutionizing health benefits to resource organizations with missions that matter. As the top ICHRA administration company, we’re helping increase access to health coverage through our full suite of ICHRA solutions.
Whether it’s through our streamlined PeopleKeep ICHRA administration platform or our ICHRA+ and ICHRA+ Enterprise solutions, we can help businesses of all sizes set up and manage their ICHRAs with ease. With our recent investment, we’re well-positioned to tackle ICHRA’s continued growth while offering innovative tools and customer service.
As ICHRA adoption accelerates, more employers are embracing personalized health benefits. Remodel Health is here to help every step of the way. Contact us to learn more about our suite of ICHRA solutions.
Sources:
- IRS Notice 2013-54
- HRA Council 2024 Report
- MedCityNews : StretchDollar
- PR Newswire: Thatch
- PR Newswire: Venteur
- PR Newswire: Gravie
- PR Newswire: Take Command
- Zorro
- KFF 2024 Employer Health Benefits Survey
- Ideon: Lowest premiums map
- Fierce Healthcare: Oscar Health growth ambitions
- H.R.3799 – CHOICE Arrangement Act
- HRA Council response to U.S. House Ways and Means Committee
