Employers that moved to an individual coverage HRA did so for a reason that still holds: a defined contribution, a predictable line item, and no group renewal negotiation every autumn. What a lot of those employers have not done is revisit the contribution amount since they set it.
The numbers say that is now a real compensation decision rather than an administrative one. Analysis of Marketplace filings from the Peterson Center on Healthcare and KFF found 276 insurers across all 50 states and DC proposing a median premium increase of roughly 15% for 2027, on top of a median 18% proposed for 2026. If those hold, typical Marketplace premiums will have risen by more than a third across two years.
The structural feature that becomes a problem
An ICHRA’s defining characteristic is that employer contributions are not required to rise with premiums. That is the whole point — it converts an open-ended obligation into a fixed one. It is also exactly why a flat contribution through a period of double-digit increases functions as a pay cut that never appears in any compensation review.
Work a simple case. An employer sets $500 per month for a single employee whose benchmark plan costs $600 — the employee pays $100. Apply an 18% increase, then 15%: that plan is now roughly $814. With the contribution unchanged, the employee’s share went from $100 to $314 per month. Nothing was announced, no policy changed, and the employee’s take-home dropped by about $2,500 a year.
Older employees on age-rated premiums absorb larger absolute increases than younger ones from the same percentage move, so a flat contribution also widens the gap across your workforce over time.
What to actually decide this cycle
Decide the indexing rule explicitly, and write it down. The defensible options are: hold flat and accept the real-terms reduction, index to a stated percentage, or index to a benchmark plan in each employee’s rating area. Each is legitimate. What is not defensible is ending up at “flat” by not having the conversation, which is the default outcome for most employers.
Price the benchmark in your actual geographies. National medians are for context, not budgeting. Rate filings vary enormously by state and rating area, and an employer with staff in three states can see three very different increases. Pull the benchmark silver premium for the age bands you actually employ in the counties where they live.
Model total compensation, not the benefits line. If the goal is to keep employee out-of-pocket roughly flat, the required contribution increase is arithmetic, not judgment. Then compare that number against what a group plan renewal would have cost. Sometimes the ICHRA still wins on both cost and flexibility; sometimes the gap has closed. Either answer is fine — knowing which one you are in is the point.
Check affordability before you assume savings. For employers subject to the employer mandate, an ICHRA contribution too low to make coverage affordable creates penalty exposure, and affordability is measured against the lowest-cost silver plan in the employee’s rating area. When those premiums move by double digits, an arrangement that was comfortably affordable last year can quietly stop being so.
Look at what this does to enrollment behaviour. When the employee share rises sharply, some will trade down to a bronze plan with a deductible they cannot actually absorb, and some will drop coverage. Both outcomes eventually reach you — as turnover, as delayed care, as a benefit that no longer helps you win a candidate.
Two things to check in the plan documents before open enrollment
Class definitions. ICHRA rules let you vary contributions by permitted classes — full-time versus part-time, salaried versus hourly, geographic rating area, and a few others — but not arbitrarily by individual. If the response to premium increases is “give more to the people who complained,” that is not a class, and the arrangement’s compliance rests on the classes being applied consistently.
Age and family-size variation. An ICHRA may scale contributions by age up to the ratio the individual market itself uses, and by family size. Employers that set one flat dollar amount for everyone are leaving a legitimate tool unused, and it is the tool that most directly addresses the widening gap between your youngest and oldest employees as premiums rise.
Both of these are decisions you make once and then index. Neither requires a broker to re-quote.
The broader market context, briefly
ICHRA adoption is growing quickly, and insurers are building products specifically around it. That is mostly good for employers: more plan choice in more rating areas is precisely what makes a defined-contribution model workable. The scenario worth watching is the individual market getting more expensive or thinner in specific geographies, which turns “your employees can buy whatever suits them” into “your employees in that county have two bad options.” Check plan availability in your rating areas at the same time you check price.
The decision, stated plainly
If you set an ICHRA contribution in 2024 or 2025 and have not touched it, your employees are absorbing roughly a third more premium than when the arrangement was designed. You may decide that is the correct allocation of cost — defined contribution is a legitimate strategy and cost-shifting is sometimes the deliberate choice. Make it deliberately, communicate it during open enrollment rather than letting people discover it on a January paycheck, and put the indexing rule in writing so next year’s version of this conversation takes ten minutes instead of a quarter.
