Individual Coverage Health Reimbursement Arrangements (ICHRAs) are rapidly gaining traction as an alternative to traditional group plans. What started as a niche option for small employers is now reshaping the overall health insurance market and accelerating a fundamental shift toward enrollment in the individual market.
As adoption grows, so do operational demands. ICHRA does not fit neatly into legacy group-based systems. It requires a decentralized, multi-stakeholder infrastructure: benefits technology providers (BenTechs), third-party administrators (TPAs), operators and marketplaces, all working together to support employers and employees in real time.
To keep pace, health plans need a flexible infrastructure outside of Exchange that can support non-standard data, high-volume enrollment, and partner integrations, without creating new administrative burdens or requiring complete system overhauls.
Why Employers Are Turning to ICHRA
Employers’ frustration with traditional group coverage is driving the change. Rising healthcare costs, unpredictable renewal rates, and limited benefit customization have pushed many employers to look for alternatives.
With ICHRA, companies give their employees a stipend to spend on a health insurance plan of their choice. Originally seen as a niche solution for small employers, ICHRA’s popularity has exceeded expectations. According the HRA councilAdoption increased by 52% among small employers and 34% among large applicable employers in 2025. Another report found that almost half of large employers They are considering the change.
ICHRA addresses many limitations of traditional group plans by supporting:
- Better cost management for employers
Healthcare costs and claim volume are driving up group insurance premiums, and unexpected high-cost medical events make it nearly impossible for employers to anticipate future insurance rates.
ICHRA allows companies to set fixed, predictable contributions per employee, avoiding cost increases tied to plan usage or healthcare prices.
Additionally, ICHRA shifts responsibility for plan selection to employees, and employers can rely on ICHRA administrators to handle setup, compliance, reimbursement, and ongoing operations. This workflow makes health insurance benefits much more manageable for businesses of all sizes.
- Reducing the administrative burden for health plans.
The ICHRA not only relieves administrative pressure on employers: it also creates new operational advantages for health plans.
Group coverage often requires customized plan design, employer-specific services, and intensive reporting structures. Instead, ICHRA directs enrollees to Qualified Health Plans (QHPs) already offered in the individual market. That means less customization, fewer exceptions, and a more streamlined approach to enrollment and billing.
Instead of managing a patchwork of small group accounts, health plans can focus on optimizing their individual product portfolio and expanding enrollment.
- Expanded Employee Coverage Option
Traditional group plan offerings may not fit each employee’s healthcare needs and preferences. ICHRA gives people greater control over their benefits, allowing them to choose their ideal coverage.
Beyond offering more options, ICHRA also makes benefits available to more people. Employers may cover employees who were not previously eligible for insurance, such as contractors or part-time workers. It is also attracting new companies to the market. The HRA Council found that 83% of employers with an HRA did not previously offer coverage.
Increased adoption is driving new players to the market. venture capital has invested $700 million in ICHRA startups. New providers are launched weekly, each with their own enrollment flows, payment processes, and integration formats.
This growth brings fragmentation. Modernized systems and one-size-fits-all integrations can’t handle the processes. Supporting ICHRA at scale requires a flexible infrastructure capable of connecting disparate data sources, standardizing inputs, and enabling real-time coordination between health plans, administrators, and enrollment platforms.
Aging infrastructure not designed for ICHRA
ICHRA operates within a decentralized multi-stakeholder ecosystem. Each employer uses a different third-party administrator (TPA). Each employee can sign up through an independent platform, exchange or marketplace. Each provider has their own file format, enrollment process, and payment cadence. Multiply this by hundreds of employers and thousands of members and you get a thicket of non-standard data, asynchronous reporting, and manual intervention.
But employees and employers don’t care about complexity; They expect their coverage to work like the group plans they are used to.
Let’s examine the real-world implications of this fragmented system for a small business. Each person can select a different plan through a different enrollment platform. One uses a private market. Another registers through a captive agent. File formats vary. Shipping times do not match. Some records arrive incomplete or late, or not at all.
The case for flexible off-exchange infrastructure
Supporting ICHRA at scale does not mean building a new system from scratch. It means investing in infrastructure that can adapt to different markets, plan types, data formats and operating models. What does that look like?
- Real-time integrations between TPA, BenTechs, enrollment platforms and health plans.
- Standardize data entries to align with emerging CMS interoperability requirements.
- Adaptive enrollment logic that works across multiple platforms and user journeys.
- Dashboards and reports that give health plans and their agents visibility into enrollment status, contributions, and compliance.
- Member-facing tools that simplify plan selection and reduce churn during onboarding.
According to the HRA Council, the majority of Marketplace enrollees who access coverage through ICHRA or QSEHRA are between 18 and 44 years old. This younger population carries lower risk and more predictable costs, helping to stabilize the Market’s broader risk pool and supporting more consistent premium trends.
This vision aligns with CMS’s broader push to modernize ACA markets through interoperability and standardized data sharing. The goal: improve transparency for consumers while reducing administrative friction in plans.
Address fraud, waste and abuse
An additional challenge is clear: fraud, waste, and abuse remain major problems in ACA markets. In some states, Between 20% and 45% of ACA enrollees do not file claims in a year. Investigations point to practices such as brokers inflating income to qualify people for $0 premium plans, or fraudulent enrollment designed to capture subsidies and commissions.
ICHRA could exacerbate these problems if security barriers and data transparency are not prioritized. As employer-funded dollars flow into the individual market, the industry will need systems that can verify eligibility, reconcile payments, and detect anomalies in real time. As the Centers for Medicare and Medicaid Services (CMS) has emphasized, the ACA’s existing infrastructure can be leveraged to support off-exchange ICHRA markets while maintaining transparency and protecting enrollees.
Questions also remain about flexibility in plan design, supplemental benefits and consumer protection.
ICHRA isn’t replacing group coverage—it’s expanding what’s possible
ICHRA is not replacing group coverage – it is expanding what is possible. It opens the door to new employer segments, new member populations, and new partnerships. But without a flexible off-exchange infrastructure, that opportunity is harder to seize.
The goal of health plans is to build a system that can accommodate group, individual, and ICHRA-funded populations. One that helps operators meet market demand without increasing complexity or cost. Because when enrollment strategies evolve, infrastructure must support them, not slow them down.
The employers are here. Those registered are coming. The question is whether the infrastructure is ready.
About Kevin Deutsch
Kevin Deutschh is the General Manager and Senior Vice President of Health Plan Solutions at softheona leading cloud-based purchasing, eligibility, enrollment, billing and member management solution for health plans, brokers and government agencies. Kevin helps health plans across the country in their mission to expand and retain coverage by providing a streamlined and efficient purchasing, enrollment and billing experience.
