As employers navigate the rising costs of traditional group health plans, they are quickly discovering the flexibility of HRAs. According to a 2024 ICHRA & QSEHRA Growth Trends Report by the HRA Council, ICHRA adoption increased 29% year-over-year in 2024 compared to 2023, with 84% adoption by employers with 50 or more employees.
Last year, Benafica helped countless companies—large and small—make the switch to an ICHRA. In industries from construction to dentistry, retail and food and beverage, companies across the spectrum are finding that the benefits of an ICHRA are more favorable to their bottom line.
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Let’s take a closer look at the key factors driving ICHRA’s rapid growth and what this trend means for the future of employer-sponsored health benefits.
Rising Costs for Group Health Care
Employers may be feeling the pinch from rising employee health premiums. Every year, the costs go up and costs have accelerated faster in the last 3 years. According to an analysis by predictive analytics consultant Aon, premiums for employer-sponsored coverage rose 6.4% on average last year. Employer-sponsored health insurance premiums were an average of $14,823 for individuals. Furthermore, Aon expects costs to rise nearly 9% in 2025, bringing the average cost per employee to over $16,000.
“Employers expect employer-sponsored health care costs to rise 9% in 2025, to more than $16,000 per employee on average.”
“Rising healthcare benefit costs place an unsustainable burden on businesses,” says Benafica CEO Ryan Jewison. “Offering a solution for companies that provides better cost control and predictability while empowering employees to choose their own health plans is a win for our customers.”
With healthcare costs rising at record rates, employers are turning to HRAs like ICHRAs and QSEHRAs to put a cap on their benefits spending. Unlike traditional group plans with unpredictable premium hikes, HRAs allow businesses to set a fixed contribution, keeping costs manageable. Employees also gain more personal choice, selecting plans that truly meet their needs—often at lower costs—reducing wasteful spending.
Why ICHRAs are Becoming More Attractive
As discussed above, the number one reason why ICHRAs are becoming more attractive is the ability for employers to control health care spending costs. But ICHRAs also provide other benefits to businesses like:
- Tax Advantages: Employer contributions are tax-deductible, and employee reimbursements are tax-free for the employee.
- Simplified Compliance: By reimbursing employees for individual coverage, employers can eliminate many complexities associated with the administration of group health plans.
- Flexibility in Plan Design: Employers can customize contributions based on employee classes (e.g., full-time, part-time, remote workers). They can also tailor eligible expenses to meet their employee’s needs.
- More Options for Employees: Employees can select plans that best fit their healthcare needs, increasing satisfaction.
- Remote Workforce Friendly: Unlike traditional group plans, ICHRAs work across multiple states, making them ideal for distributed workforces.
Advantages for Small and Mid-Sized Businesses
While HRAs can help large businesses control health care spend, the HRA Council report also found that they’ve enabled many small businesses to offer health care for the first time—a phenomenal milestone!
“83% of ICHRA/QSEHRA adopters were able to offer employee health insurance for the first time.”
Besides being able to be more competitive by offering some level of health care — which many employers wish to do but are held back by the significant cost of group health coverage—ICHRA’s allow small and medium-sized businesses to adapt because of the ability to contribute any amount. For example, if a small business wants to contribute some amount of health care reimbursement, like $250/month, they are able to do that through an ICHRA.
Is Your Company Ready to Make the Switch?
ICHRA began as a way for small employers to offer health benefits. It has since expanded into coverage for millions of Americans in the workforce. As more employers seek sustainable solutions, partnering with a knowledgeable administrator like Benafica ensures a seamless transition and long-term success. If you’re considering ICHRA for your business, now is the time to explore how it can work for you.
Learn more about our HRA offerings ICHRA and QSEHRA and fill out our contact form or give us a call at 651-287-3253 to get started.