For human resources leaders, the health benefits challenge is constant: deliver competitive options that meet vast employee needs without breaking the budget. Rising premiums, unpredictable renewals and increasingly diverse workforces make the traditional group plan model harder to sustain.

That’s why the Individual Coverage Health Reimbursement Arrangement (ICHRA) is gaining momentum as a core benefits strategy. According to the HRA Council, applicable large employers (ALEs with more than 50 FTEs) are choosing ICHRA. Aggregated ALE adoption is up 34%, with some large employer cohorts showing 49% year over year growth from 2024-2025.

Why adoption Is accelerating

Businesses that are adopting ICHRAs aren’t just looking for cost savings — they’re looking for stability and flexibility. An ICHRA delivers both by shifting from a defined benefit to a defined contribution model.

At its core, an ICHRA means that businesses can reimburse each employee for the health plan of their choice. Instead of picking from just two or three group options, ICHRAs provide funds from the employer that employees can spend on any health plan they like.

Employers choose how much to contribute. Employees choose the health plan that works for them.

Strategic advantages of ICHRAs

• Predictable Budgets: Fixed contributions mean no more renewal shocks tied to group claims. HR can forecast benefits spend with confidence.

• Flexibility Across the Workforce: An ICHRA allows you to determine a fixed monthly allowance based on a specific employee class (e.g., full-time, part-time, remote). This makes it easier to address the realities of a diverse, multi-location workforce without being locked into a single group plan structure.

• Long-Term Strategy Alignment: By stabilizing costs and offering a scalable framework, ICHRA positions HR to align benefits strategy with broader organizational goals — whether that’s supporting growth, adapting to workforce shifts, or enhancing total rewards packages.

• Competitive Positioning
  In a tight labor market, offering benefits that adapt to individual needs can be a differentiator in attracting and retaining talent.

Employee impact at scale

Notably, the benefit of ICHRAs extends beyond cost control and into employee satisfaction. Instead of two or three group plan options, employees can choose from dozens of ACA-compliant individual plans on the marketplace, extending the range of coverage options to better match individual medical and financial needs.

In one employer’s first year with ICHRA, employees selected over 100 unique plans. Younger employees gravitated toward lower-premium, higher-deductible options. Families chose plans with robust pediatric coverage. Others prioritized keeping specific providers in-network.

This level of personalization often isn’t possible with a traditional group plan.

This means, though, success with switching from a group plan to an ICHRA starts with the right infrastructure. Benefits administration platforms play a critical role, guiding employees through plan selection, managing reimbursements and ensuring compliance.

Employee education is also key. In year one, most employee questions focus on understanding plan options and networks. By year two, employees tend to become more confident, focusing on working with human resources to figure out the best way to optimize their coverage.

The shift toward personalization in benefits mirrors broader workplace trends — flexibility, choice, and employee empowerment. ICHRAs offer a fresh way to align benefits strategy with these new, modern expectations while maintaining cost control.