Is ICHRA the 401(k) of Healthcare—or Just Another Hype Cycle?

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At this moment, we are in the thick of an open enrollment season where sticker shock meets complexity and uncertainty. Where the reality of our less-than-perfect healthcare system – one built for a post-war workforce that has long-since retired – hits us hard as we decide how we will insure ourselves in 2026. Employer-sponsored plans have been the norm, a recruitment perk offered by companies during World War II wage freezes. Now, over 155 million of us are still relying on this system, although the shape of our careers – mobile, hybrid, fragmented — has changed forever. Which brings us to the Individual Coverage Health Reimbursement Arrangement (ICHRA).

Another acronym, another possible cure for what ails us, both physically and financially. Like the 401(k), it is billed to rewrite the company-employee playbook: employers contribute a defined allowance; employees buy their own plan from the ACA marketplace (the most common route), through a broker or directly from an insurance company. The bonus? They can keep their plan if they leave the job or move states.

From Company-Driven to Employee-Driven Benefits

In the 1980s, employers handed the reins of control (and risk) to their employees, as pensions and retirement funding moved to 401(k)s. Both parties benefited from tax breaks: reduced taxable income for workers and a tax-deductible business expense for employers. ICHRA is similar as it offers defined contribution, personal choice and the ability to travel with you as you change employers. With ICHRA, employers no longer pick the plan: instead they pick the allowance. Workers get to choose the health plan, the network and the deductible – and they get to keep it across jobs – critical if you have a chronic condition and already have an established group of familiar healthcare providers in place. The big “however” is that both plans presume expertise on the part of the employee — a working knowledge of financial investments as well as health plans and the complexity they carry.

For businesses, this means much less paperwork and more stable costs. For employees, it means the freedom to pick and keep a plan that fits them. So rather than the company choosing everything, the employee gets to decide — and take their coverage with them when they move on.

ICHRA Growth Is Real—but Relative

Although most are unfamiliar with ICHRA, adoption has continued to increase: some sources cite growth rates of 29% year-over-year between 2023 and 2024. However, ICHRA is still relatively tiny compared to the broader market of employer-sponsored health plans. Some estimates place current ICHRA-covered lives in the hundreds of thousands, not millions. So yes — it’s rising. But this is hype, at least in part, because the scale is far from a tectonic movement… for now.

What To Watch Out For

Here’s where the hype gets a reality check—and where you might want to pause.

Affordability and Market Access: While ICHRA makes portability easy, it doesn’t necessarily translate into a lower premium. Individual-market premiums vary depending on region, and employer allowances may not cover the price.
Coverage Complexity & Too Much Choice: Workers who were content with one health plan now must navigate dozens of options. For those unfamiliar with the individual market, this shift can cause choice paralysis.
Rising ACA Premiums: With the sticker shock of recent ACA price hikes, an ICHRA may be less competitive than the usual group plans, especially for older workers or families who face age-rated pricing.
Provider Networks & Continuity: Moving from a group plan to the individual market may mean switching provider networks, which can derail care for those with chronic conditions.
Underlying System Size & Incentives: The traditional employer-sponsored market still dwarfs ICHRA in size. Brokers and benefits advisors, whose incentives tie to group plans, may not be aligned with this model today.

Is ICHRA Just Another Shiny Bright Object?

While we are comparing ICHRA to the 401(k), the latter did not replace pensions in a blink of the eye. But it did redistribute responsibility. ICHRA could do the same for healthcare: it gives flexibility, but also more burden. If employer allowances don’t scale, or individual-market premiums surge, its recent growth will likely stall.

As a healthcare advisor, I’ve watched employers grapple with spiraling premiums and employees face coverage gaps at the worst possible times. ICHRA isn’t the panacea. It does not cure all ills of the U.S. healthcare-benefits system. But it is progress — and in this space, progress is worth noting.

This open-enrollment season, ICHRA presents both opportunity and an asterisk: a modern, market-based choice — but one that begs for measured decisions and expectations grounded in reality. Ownership over your health benefits? Maybe. A silver bullet? Not yet.

Forbes