The Individual Coverage Health Reimbursement Arrangement (ICHRA) has been steadily gaining traction since its introduction in 2020, but 2025 marks a turning point. Employer adoption of ICHRAs has surged, with notable momentum among mid-sized and large organizations.

For benefits administrators who are charged with balancing budgets, compliance, and employee satisfaction, this shift is impossible to ignore. ICHRAs are no longer a niche option; they are fast becoming a mainstream strategy for managing health benefits.

Recent data highlights how quickly ICHRAs are scaling and some of the factors contributing:

• ICHRA saw a 34% increase in adoption among employers with 50 or more full-time employees from 2024 to 2025.¹
• Nearly 450,000 employees and dependents were offered an ICHRA or QSEHRA this year, reflecting a nearly 50% jump from 2024.²
• For small employers, ICHRAs provide an accessible entry point: 83% of those offering ICHRA or QSEHRA in 2025 had not previously offered any coverage.¹
• Roughly 92% of employers who offered an HRA in 2024 continued doing so in 2025, meaning churn is low.³

This adoption curve signals growing confidence that ICHRAs can deliver both administrative simplicity and employee satisfaction.

Several factors are fueling adoption of ICHRAs. For many employers, cost control is top of mind. By setting a defined contribution toward coverage, organizations can create more predictable benefits budgets while giving employees the freedom to shop for a plan that works best for them.

Flexibility is another key advantage, especially for companies with employees spread across multiple states or regions. Rather than juggling the complexities of different group plans with varying provider networks, employers can offer an ICHRA that adapts seamlessly to diverse geographies.

Equally important is the employee experience. Workers increasingly expect benefits that reflect their individual needs, and ICHRAs empower them to choose ACA-compliant plans that align with their health, financial, and family situations. This emphasis on personalization fits squarely within the broader trend toward consumer-driven health and wealth benefits.

There’s also been encouraging legislative momentum around ICHRAs. In 2025, congressional proposals aimed to elevate ICHRAs from regulatory constructs to statutory fixtures — rebranding them as “CHOICE Arrangements” (Custom Health Option and Individual Care Expense) and introducing valuable efficiencies and incentives, including codification into law, shorter notice periods, pre-tax cafeteria election capability, and small employer tax credits.

However, not all of these enhancements made it into the final version of the One Big Beautiful Bill Act. The CHOICE provisions and rebranding ultimately didn’t survive revisions and were removed before the law was enacted. The resulting legislation, while advancing other priorities, stopped short of providing the long-term statutory certainty that ICHRAs’ proponents sought.

That said, these provisions are far from forgotten. Many observers anticipate that proposed ICHRA enhancements may be reintroduced in the next Congress session as lawmakers continue to explore ways to modernize benefit delivery and expand access to flexible coverage models.

Taken together, the legislative conversation has highlighted areas where ICHRA could evolve. Yet for now, its long-term future remains entrenched in administrative regulation rather than statutory permanence.

For administrators, ICHRA adoption requires a shift in mindset and process:

• Administration and compliance: Unlike group plans, ICHRAs must meet specific ACA and IRS rules around allowance design, notices, and reimbursement. Partnering with the right technology and administration platform is essential to reduce risk and workload.
• Employee education: Because ICHRAs put decision-making in employees’ hands, administrators must ensure workers have access to tools, guidance, and support during plan selection. Clear communication is key to success.
• Integration with other benefits: Many employers are not replacing group coverage altogether. Instead, ICHRAs are being layered alongside traditional plans as part of a hybrid benefits strategy. This gives administrators flexibility to tailor benefits for different workforce segments.

The outlook for ICHRAs in 2025 and beyond is promising. Forecasts point to continued double-digit adoption growth⁴ as more employers recognize both the financial and strategic advantages of the model.

At the same time, technology will play a central role in enabling scale: streamlining enrollment, providing decision support, and simplifying reimbursement administration to reduce the burden on benefits teams.

Importantly, ICHRAs are not expected to replace traditional group plans entirely. Instead, many employers are adopting a hybrid approach, using ICHRAs for certain employee populations while maintaining group coverage for others, creating a more flexible and tailored benefits strategy.

ICHRA adoption is accelerating, and benefits administrators are on the front lines of this transformation. By embracing ICHRAs, employers can gain tighter budget control, reduce administrative complexity, and deliver a more personalized benefits experience that resonates with today’s workforce.

At Alegeus, we view ICHRAs as an important addition to the consumer-directed benefits toolkit — one more way to extend choice, flexibility, and control to employees while helping administrators keep programs cost-effective and competitive.

Sources:

¹ PR Newswire | ² Healthcare Dive | ³ Remodel Health | ⁴ Bailey & Co.