Hospitals exist to care for people—so it’s hard to reconcile that a benefit meant to support their employees often ends up hurting them. Many hospitals self-fund their group health plans in an effort to maintain more control over their health benefits costs. But high claim volume from their workforce can wrest financial control out of their hands.
Healthcare workers are different. They’re exposed to more risk, access care more often, and are more likely to manage chronic conditions.
The result? Higher claims, higher costs—and more of that cost pushed onto employees through higher premiums, narrower networks, and higher copays and deductibles. So what if there’s a better way?
What if hospitals could offer employees access to quality health coverage that doesn’t punish them for needing care? What if they could stabilize their benefits budget and give their team real choice?With an individual coverage health reimbursement arrangement (ICHRA), all of this is possible.
In this article, you’ll learn:
- How this modern health benefit solution helps hospitals overcome their unique challenges
- What considerations to keep in mind during the switch to an ICHRA
- How Remodel Health can make this transition more seamless
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The unique challenge hospitals face
According to KFF, there are over 6,000 hospitals in the U.S. that employ 6.7 million individuals1. Labor is the largest expense for these employers, and nearly a third of that cost goes toward employee benefits like health insurance2.
Hospitals often self-fund their group health benefits to help manage labor costs and maintain more control over their budget. This means that instead of paying an insurance carrier a premium to cover employee health claims, they earmark money to pay for these healthcare costs themselves.
While this model does offer more financial control, it also comes with more risk—and hospital employees may represent a riskier population than those in other industries.
Research has shown that:
- Healthcare workers have increased exposure to communicable diseases and workplace injuries3, leading to higher healthcare utilization.
- They may be more likely to access services due to their proximity to care.
- They experience challenging working conditions that include long hours, stressful situations, and high physical demands4. This can cause chronic conditions like hypertension and mental health issues.
These realities drive up employee claims, which increase the cost of offering a self-funded plan for employers. When this happens, employers often pass down some of these increased costs in the form of higher premiums and increased employee cost-sharing, which act as higher barriers to employee enrollment.
This sets off a self-perpetuating cycle: as healthier employees opt out, those who do enroll tend to be the ones who need coverage most—typically with higher medical costs. Their claims drive plan expenses even higher. This prompts additional cost-sharing and further shrinks the risk pool.
The result is a benefit that’s increasingly difficult to afford and harder to sustain.
How ICHRA changes the equation
An ICHRA can flip this script. With this group health benefit, hospitals can provide a fixed contribution for employees to purchase their own coverage instead of funding unpredictable claims year after year.
The ICHRA is a formal, IRS-approved group health benefit that has been around since 2020. It works as follows:
- An employer sets a defined monthly contribution amount for each employee. This contribution can vary based on an employee’s age, family status, or employee class, like full-time status.
- Employees opt into the benefit and enroll in an eligible individual insurance policy. These include plans found on the ACA marketplace, off-exchange plans, and Medicare Parts A and B.
- Once employees enroll in a qualifying plan, they can use their employer-provided allowance toward the cost of their selected individual health insurance premiums and any other eligible medical expenses.
Employers can use an ICHRA to provide a more personalized health benefit while satisfying the ACA employer mandate. This model relieves hospitals of the burden of managing risk and claims. But it’s not just an administrative win—it’s a meaningful shift for revenue and for employees, too.
What does this mean?
- More choice for employees: Staff can pick the plan that fits their needs. They can select a plan that covers their preferred doctors or specific prescriptions.
- No penalty for higher claims: Individual health insurance plans are community-rated, meaning their prices won’t fluctuate based on medical history or usage.
- More predictable costs for hospitals: Employers set their budget with defined contributions, not projected claims.
There’s also another benefit to consider. By transitioning employees from a traditional group plan to an ICHRA, hospitals can turn employee care into additional revenue.
Here’s how that works:
- Employees participating in an ICHRA can enroll in individual commercial plans that their hospital can accept.
- When employees seek care at their workplace, the hospital can bill the carrier for the cost of care instead of paying for the claim directly through a self-funded plan.
- This shift turns employee claims into a potential revenue stream, helping offset operational costs and improve financial stability.
The challenges of ICHRA
Shifting from a traditional group health plan to an ICHRA model is a strategic move that can help employees, benefit administrators, and financial officers. But it’s not without complexity.
Hospitals must become familiar with an entirely new plan strategy. They need to understand how they can structure and administer this health benefit. Employers may wonder how they can define eligibility, tailor contributions, and distribute allowances.
There’s also the matter of change management for employees. Employees may be unfamiliar with how an ICHRA works and what their responsibilities are. They may need help shopping for and selecting coverage or need assistance if they run into any challenges with their carrier.
Without the proper support, this transition can feel like a heavy lift, especially for a large group. But the challenges the shift to ICHRA presents aren’t dealbreakers—they’re simply reminders that this health benefit isn’t plug-and-play. It’s a powerful tool that requires expert implementation, thoughtful communication, and ongoing support.
That’s where the right ICHRA partner makes all the difference.
Why Remodel Health?
If you’re a group broker supporting hospitals, you’re already navigating one of the most complex benefits environments out there. You understand the pressure your clients face—rising claims, shrinking margins, and employees who expect more from their health benefits.
At Remodel Health, we’re here to help you expand your toolbox, not replace it. We partner with brokers to bring ICHRA to hospitals in a way that’s thoughtful, compliant, and backed by experience. From providing detailed quotes that meet the unique needs of each organization to supporting employees throughout the individual plan enrollment process, we make the transition to an ICHRA feel familiar—while delivering real financial and strategic upside.
When you work with Remodel Health, you get:
- A secure, intuitive platform that makes administering and utilizing an ICHRA more seamless
- Dedicated onboarding and support for brokers, benefits administrators, and employees
- Individual enrollment help from licensed benefits advisors
- A partner who understands how to make ICHRA work for healthcare workers and their employers
Conclusion
When traditional models fall short—straining budgets, limiting employee choice, and turning benefits into burdens—it’s time to look elsewhere. The ICHRA offers hospitals a new path forward: one that delivers cost control, flexibility, and even the potential to transform employee care into a source of revenue.
But switching to ICHRA is a big shift. And with any major change, success hinges on having the right guide.
That’s why partnering with an experienced, trusted ally like Remodel Health matters. We walk with you every step of the way to ensure your ICHRA strategy works now and in the future.
Want to explore how ICHRA could work for your hospital clients? Let’s talk.
- Key Facts About Hospitals
- Bureau of Labor Statistics News Release, March 2025
- Hospital workers: an assessment of occupational injuries and illnesses
- Risk Factors for Stress and Burnout
Are you new to the ICHRA? Learn everything you need to know in our complete guide.