Individual Coverage Health Reimbursement Arrangements (ICHRAs) are rapidly gaining traction as an alternative to traditional group plans. What began as a niche option for small employers is now reshaping the broader health insurance marketplace — and accelerating a fundamental shift toward Individual market enrollment.
As adoption grows, so do the operational demands. ICHRA doesn’t fit neatly into legacy group-based systems. It requires a decentralized, multi-stakeholder infrastructure: benefit technology vendors (BenTechs), third-party administrators (TPAs), carriers, and marketplaces, all working together to support employers and employees in real time.
To keep pace, health plans need flexible Off-Exchange infrastructure that can support nonstandard data, high-volume enrollment and partner integrations — without creating new administrative burdens or requiring full system overhauls.
Why Employers Are Turning to ICHRA
Employer frustration with traditional group coverage is driving change. Rising healthcare costs, unpredictable renewal rates and limited benefit personalization have pushed many employers to seek alternatives.
With ICHRA, businesses 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 to the HRA Council, adoption increased 52% among small employers and 34% among applicable large employers in 2025. Another report found that almost half of large employers are considering the switch.
ICHRA addresses many limitations of traditional group plans by supporting:
- Better cost management for employers
Healthcare costs and claim volumes are driving up group insurance premiums, and unexpected high-cost medical events make it nearly impossible for employers to anticipate future insurance rates.
ICHRA enables businesses to set predictable, fixed contributions per employee, avoiding cost increases tied to plan usage or healthcare prices.
Additionally, ICHRA shifts the responsibility of 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 significantly more manageable for businesses of all sizes.
- Reduced administrative burden for health plans
ICHRA doesn’t just ease administrative pressure on employers — it also creates new operational advantages for health plans.
Group coverage often requires custom plan design, employer-specific servicing, and intensive reporting structures. In contrast, ICHRA directs enrollees to Qualified Health Plans (QHPs) already offered on 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 scaling enrollment.
- Expanded coverage choice for employees
Traditional group plan offerings may not align with every employee’s healthcare needs and preferences. ICHRA gives people greater control over their benefits, allowing them to choose their ideal coverage.
Beyond offering more choices, ICHRA also makes benefits available to more people. Employers can cover employees previously ineligible for insurance, such as contractors or part-timers. It’s also bringing new businesses into the market. The HRA Council found that 83% of employers with an HRA did not previously offer coverage.
The increased adoption is driving new players into the market. Venture capital has invested $700 million in ICHRA startups. New vendors are launching weekly, each with its own enrollment flows, payment processes and integration formats.
This growth brings fragmentation. Retrofitted systems and one-off integrations can’t handle the processes. Supporting ICHRA at scale requires flexible infrastructure capable of connecting disparate data sources, normalizing inputs and enabling real-time coordination between health plans, administrators and enrollment platforms.
Dated Infrastructure Isn’t Built for ICHRA
ICHRA operates within a decentralized, multi-stakeholder ecosystem. Each employer uses a different third-party administrator (TPA). Each employee may enroll through a separate platform, exchange or marketplace. Each vendor has its own file format, enrollment process and payment cadence. Multiply this by hundreds of employers and thousands of members, and you get a tangled web of nonstandard data, asynchronous reporting and manual intervention.
But employees and employers don’t care about the complexity; they expect their coverage to function like the group plans they’re used to.
Let’s examine the real-world implications of this fragmented system for a small company. Each person might select a different plan through a different enrollment platform. One uses a private marketplace. Another signs up via a captive agent. File formats vary. Submission timelines don’t align. Some records arrive incomplete or late — or not at all.
The Case for Flexible Off-Exchange Infrastructure
Supporting ICHRA at scale doesn’t mean building a new system from scratch. It means investing in infrastructure that can flex — across marketplaces, plan types, data formats and operational models. What does that look like?
- Real-time integrations across TPAs, BenTechs, enrollment platforms and health plans.
- Standardize data inputs to align with emerging CMS interoperability requirements.
- Adaptable enrollment logic that works across diverse platforms and user journeys.
- Dashboards and reporting that give health plans and their brokers visibility into enrollment status, contributions, and compliance.
- Member-facing tools that simplify plan selection and reduce drop-off during onboarding.
According to the HRA Council, the majority of Marketplace enrollees accessing coverage via ICHRA or QSEHRA are between ages 18–44. This younger population brings lower risk and more predictable costs, helping stabilize the broader Marketplace risk pool and support more consistent premium trends.
This vision aligns with CMS’s broader push to modernize ACA markets through interoperability and standardized data exchange. The goal: improve transparency for consumers while reducing administrative friction for plans.
Addressing Fraud, Waste, and Abuse
One additional challenge is clear: fraud, waste, and abuse remain significant issues in ACA markets. In some states, 20–45% of ACA enrollees file no claims in a year. Investigations point to practices such as brokers inflating incomes to qualify individuals for $0-premium plans, or fraudulent enrollments designed to capture subsidies and commissions.
ICHRA could compound these issues if guardrails and data transparency aren’t 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 & Medicaid Services (CMS) has emphasized, existing ACA infrastructure can be leveraged to support Off-exchange ICHRA markets while maintaining transparency and safeguarding enrollees.
Questions also remain around flexibility in plan design, supplemental benefits, and consumer protections.
ICHRA Isn’t Replacing Group Coverage — It’s Expanding What’s Possible
ICHRA isn’t replacing group coverage — it’s expanding what’s possible. It opens the door to new employer segments, new member populations and new partnerships. But without flexible Off-Exchange infrastructure, that opportunity is harder to realize.
The goal for health plans is to build one system that can flex across group, Individual and ICHRA-funded populations. One that helps carriers meet market demand without increasing complexity or cost. Because when enrollment strategies evolve, infrastructure should support them, not slow them down.
The employers are here. The enrollees are coming. The question is whether the infrastructure is ready.
About Kevin Deutsch
Kevin Deutsch is the General Manager and Senior Vice President of Health Plan Solutions at Softheon, a leading cloud-based shopping, eligibility, enrollment, billing, and member management solution for health plans, brokers and government agencies. Kevin aids health plans across the country in their mission to expand and retain coverage by providing a streamlined and efficient shopping, enrollment and billing experience.
