Employers confronting sharp increases in group health insurance costs are increasingly turning to Health Reimbursement Arrangements over traditional health insurance plans. More than 20,000 firms used HRAs in 2026, a 53% increase from the year before, according to the HRA Council. These plans give staff fixed stipends to buy individual coverage, often with higher deductibles and limited networks. Advocates say they can give employers more financial breathing room and employees more freedom to choose the health plans that best suit them, although those decisions may initially require more research.
Rising individual-market rates are quickly becoming the latest argument against ICHRA. The problem is that the argument ignores what is happening everywhere else.
According to KFF, “ACA Marketplace insurers are proposing a median premium increase of 15% in 2027.” That comes on top of the roughly 20% rate reset heading into 2026. Predictably, some ICHRA naysayers are pointing to those increases as evidence against ICHRA.
But without context, that argument misses most of the story.
According to the 2026 HRA Council Report released today (link in comments), more than two-thirds of small businesses offering ICHRA in 2026 previously offered no health coverage. This is something I wrote about last week.
Further, nearly a third of small employers that have adopted ICHRA moved from the small group market.
So how are small group rates looking for 2027?
Again, according to KFF, small group insurers are proposing a median premium increase of 14%. Almost identical to the 15% increase in the individual market.
And the pressure is hardly limited to fully insured markets. According to Amwins’ State of the Market, 2026 Outlook report, carriers are applying medical cost trends of 10% to 12% in formula renewals.
➡️ Individual Marketplace ACA: +15%
➡️ Small Group ACA: +14%
➡️ Employer medical trend: +10% to 12%
What we are seeing is not evidence of a spiraling individual ACA market. We are seeing the impact of rising medical costs across the entire healthcare system.
ICHRA does not make medical inflation disappear. What it does provide employers with is a different way to respond to it: more consumer choice and greater control over their healthcare spend.
The good news? We are hearing from carriers that many 2027 off-exchange rate increases are coming in the single digits.
If that holds, ICHRA will outperform the broader market.
As US employers brace for the largest price hikes on employee health plans in 15 years, a growing number are opting out of group insurance altogether.
Instead of providing medical benefits directly, more than 20,000 companies are giving their employees a stipend to purchase marketplace plans for themselves. That’s up 53% from last year!
The growing popularity of these Health Reimbursement Arrangements has garnered comparisons with the transition from defined-benefit pensions to the 401(k) savings plan as corporate America’s default retirement option.
This isn’t a survey; this is real data on ICHRA growth.
A couple of myths I want to take a moment to dispel:
1. ICHRA is only for small groups.
The truth is the size of the group isn’t a great qualifier for whether they’re right for ICHRA. What is: savings, ability to effectively manage risk or to absorb large increases, a diverse workforce, an HR team and CFO open to new ideas. Not every group is right for ICHRA, but identifying the right fit ensures employer success.
2. ICHRA employers aren’t offering generous contributions and employees buy down.
The data here is clear. Employers offer generous contributions that carry further, and employees are willing to spend above that to find the right plan for them. ICHRA doesn’t have to be a compromise — it can be a “yes, and.”
3. ICHRA isn’t growing or viable.
Take a look at the graph from the HRA Council on YOY growth. More and more employers and brokers of all sizes are understanding how to utilize this new strategy in their tool set. Are you?