ICHRAs starting to catch on? 500K estimated to be enrolled today; CBO projects 2M by 2032

Note: The first portion of this is a rehash of the explainer I first posted back in June, but it's necessary in order to understand the context of how ICHRA is growing.

Individual Coverage Health Reimbursement Arrangements, or the unfortunate-sounding ICHRA for short, are a type of health insurance arrangements which were created via Trump administration-era regulations back in 2019.

Louise Norris, as always, offers the best explanation of how ICHRA's work:

An individual coverage health reimbursement arrangement (ICHRA) is a new type of health reimbursement arrangement in which employers of any size can reimburse employees for some or all of the premiums that the employees pay for health insurance that they purchase on their own...ICHRAs represent a departure from previous ACA implementation rules that forbid employers from reimbursing employees for individual market premiums....

  • Large employers can use an ICHRA to satisfy the employer mandate as long as the ICHRA benefit is substantial enough to make an individual health insurance plan affordable.
  • ...There are no limits on how much an employer can reimburse under an ICHRA (unlike a QSEHRA, which does have limits).
  • An employer cannot offer an employee a choice between a group health plan and an ICHRA; it has to be one or the other. An employer can offer both a group health plan and an ICHRA, but they have to be offered to different classes of employees so that no employee has an option to choose between the group plan and the ICHRA.

Note: This is the source of one of the concerns some have expressed about ICHRAs re. potential discrimination; see below.

  • Employees who become eligible for reimbursement of premiums under an ICHRA (or QSEHRA) are eligible for a special enrollment period during which they can enroll in an individual market health plan.
  • Employees must be enrolled in an individual market health plan (or Medicare) in order to receive the ICHRA benefit.
  • If the ICHRA benefit covers some, but not all, of the employee’s premium in the individual market, the employer can allow the employee to use a pre-tax salary reduction (via a cafeteria plan) to pay the employee’s share of the premium, but only if the plan is purchased outside the exchange. If the employee purchases on-exchange coverage with the ICHRA funds, the employee cannot use a pre-tax salary reduction to fund the remainder of the premium (assuming the ICHRA benefit doesn’t cover the full premium).

I used to assume most ICHRA enrollees would go off-exchange due to this wrinkle, but I've since been informed that it's more like a 70/30 split.

According to that blog post by the CEO of Health Sherpa (disclaimer: They're a sponsor of this site), he estimated perhaps ~200,000 people were enrolled in ACA policies via ICHRAs as of 2022, with perhaps 30% of them being off-exchange plans (which is important for a reason I'll explain later in this post).

There have been some concerns expressed about ICHRAs by healthcare reform & patient advocates, but as I explained in my previous ICHRA post, most of those concerns have either been rendered moot or simply haven't proven to be nearly as big of a problem as feared...at least so far. My takeaway to date is that ICHRAs have some trouble points but are, on the whole, a net positive...making this one of the only healthcare policies the Trump Administration's HHS Dept. came up with which I generally support (if only at luke-warm temperature).

In any event, Inside Health Policy's Amy Lotven recently posted an update on the status of ICHRA enrollment and uptake, and it sounds like it's on the move:

Health reimbursement arrangements (HRAs) that can be used to reimburse workers for purchasing individual market coverage on their own through an exchange are gaining in momentum, according to a recent report by the lobby tracking the arrangements...

...Centene, the nation's largest exchange insurer and a founding member of the HRA Council, mentioned ICHRAs during its second quarter earnings call when investors asked about the company’s merger & acquisitions pipeline.

...CMS has not published any data regarding the number of healthcare.gov enrollees that are utilizing an ICHRA but anticipates beginning to collect that data in the future, per the 2024 exchange rule.

Brian Blase, president and founder of Paragon Health Institute, who helped shepherd the ICHRA rule as a Trump administration advisor, estimates there are about 500,000 people using the option today -- and the Congressional Budget Office is now assuming about 2 million workers will have ICHRAs by 2032.

...According to a recent analysis by the HRA Council based on data provided by members, the number of workers who were offered an ICHRA in 2023 grew by 171% compared to 2022 and the number of employees offered QSEHRAs grew by 97% in the same period.

...The American Academy of Actuaries, for example, included the HRAs in their list of potential premium drivers for 2024 for the first time since 2020 due to evidence that they’re gaining traction.

...The option works best in areas where the individual market premiums are lower than the small group rates, which is largely in states that have used the Affordable Care Act’s 1332 waivers to create reinsurance programs, Novak says.

Just a few days ago, in my analysis of Virginia's preliminary 2024 ACA rate filings, I noted that state-based reinsurance programs, while well-intentioned, ironically end up harming more people than they help and are extremely difficult to justify as long as the enhanced ACA subsidies provided by the Inflation Reduction Act remain in place (they're currently set to expire at the end of 2025).

If ICHRAs really take off, however, that would lend some justification for keeping reinsurance programs around, since ICHRA enrollees aren't allowed to receive APTC assistance and thus have their healthcare policy costs based on full-priced premiums.

As far as how use of ICHRAs /QSEHRAs drives rate changes either in the small group or individual market, that will depend on the size and morbidity of the group, she said. The current thinking is that groups taking up the option may be healthier than the overall small group market, meaning they would put upward pressure on those rates. The effect on the individual market will rely on the same factors.

In other words, adding ICHRA enrollees to the ACA enrollment mix is expected to to reduce (full-priced) indy market premiums while increasing them for the small group market.