Health policy rarely produces a bipartisan moment, but that is exactly what is happening with the Individual Coverage Health Reimbursement Arrangement — better known as ICHRA. A recent Politico report described a striking pattern: red and blue states alike are passing or considering legislation to encourage small employers to adopt ICHRA.
At least six states — Arizona, Connecticut, Georgia, Mississippi, New Hampshire, and Ohio — are now considering tax credit incentives for small businesses that adopt ICHRA. Indiana led the way in 2023. The National Conference of Insurance Legislators is preparing a model bill that other states, including Florida, New Jersey, and Texas, are watching closely, and the HRA Council reports ICHRA adoption grew 29 percent year-over-year from 2023 to 2024.
“There’s not much middle ground left in Washington. This is a piece that has some bipartisan buy-in.” — Connecticut Gov. Ned Lamont
What ICHRA Is
An Individual Coverage Health Reimbursement Arrangement is a formal, ACA-recognized health benefit created by a 2019 federal rule. Instead of buying a single group health plan for everyone on payroll, the employer sets a monthly, tax-free allowance. Each employee uses that allowance to buy the individual health insurance plan that fits their family, doctors, and budget — and the employer reimburses the premium.
A few things that surprise employers when they first encounter ICHRA:
- It is available to any employer with at least one W-2 employee: small businesses, non-profits, religious organizations, government entities.
- There is no IRS minimum contribution and no annual cap, the employer decides what the business can afford.
- Contributions are tax-deductible for the business and tax-free for the employee.
- It works in all 50 states — particularly useful for remote and multi-state teams.
- It can be structured by employee class, so an employer can keep a group plan for one population (say, in-office full-time staff) while offering ICHRA to another (remote workers, part-time staff, or new hires).
In other words: the employer trades the unpredictability of group renewals for a defined contribution they control, and employees get real choice instead of one plan that may or may not fit their lives.
Why It’s Gaining Bipartisan Support
ICHRA is one of the few health policy ideas that gets a positive answer from both parties, for very different reasons.
Democrats see ICHRA as a way to strengthen the ACA marketplace and keep people insured. Connecticut Gov. Ned Lamont, who has proposed a state tax credit for small employers offering ICHRA, framed the appeal plainly: it helps small businesses absorb soaring health costs and helps keep working people off of Medicaid — a win for the state’s budget and a win for workers who would rather have private coverage.
Republicans see ICHRA as a way to put money in the hands of consumers rather than insurers, expand choice, and move people from public programs into private coverage. Ohio state Rep. Meredith Craig, the Republican lead on Ohio’s ICHRA tax credit bill, has described it as a pathway from Medicaid into the workforce and private payer insurance.
That dual appeal is why the policy survived the 2024 election cycle, why state legislatures are picking it up, and why insurers are bullish enough to design plans specifically for the ICHRA market.
The Subsidy Cliff is Here
Two forces are pushing employers and lawmakers toward ICHRA right now.
First, the enhanced ACA premium tax credits that made marketplace coverage affordable for millions expired at the end of 2025. Premiums for 2026 are up across every plan tier. Enrollment is already down more than a million people from last year, and more decline is expected. Workers who had been on $0-premium Silver plans are watching those plans jump to hundreds of dollars per month.
Second, traditional group health renewals are continuing their long-run climb. For a small business with under 50 employees, the choices have narrowed to four: absorb the increase, pass it to the team, drop coverage entirely — or do something different.
ICHRA is the “something different.” It lets the employer cap exposure to renewal risk, while still giving employees a meaningful, tax-free benefit they can use to buy coverage in a market that — thanks to state ICHRA credits and insurer interest — is increasingly built to serve them.
Where American Exchange Comes In
Most companies in the ICHRA market are software companies. They give the employer a portal, a quoting tool, and a compliance checklist — and then leave it to the employer (or their broker, or their employees) to figure out the rest. That model works fine for an organization with an HR department. For a small business without one, it tends to mean the owner is now running an ICHRA program as a side job.
American Exchange is built differently. We are a full-service group benefits broker with in-house ICHRA administration and licensed enrollment support. That means one team — not three vendors — handles:
- Strategy: side-by-side quoting of group and ICHRA every renewal, so the employer can see when ICHRA actually becomes the better number.
- Plan design: ICHRA structure by employee class, contribution modeling, plan documents, SPD, and required notices.
- Enrollment: licensed agents (real humans!) helping each employee shop and enroll in an individual plan in their own state, not a self-service portal.
- Administration: reimbursement workflows, reporting, and year-round support from the same team that ran the enrollment.
Most of our small business clients start the conversation in one of three ways: their group renewal came back with a big increase, they have remote employees and one plan does not work for everyone, or their broker mentioned ICHRA and they want a second opinion. We do the side-by-side analysis, show the numbers, and only recommend a transition when the economics support it.
Wondering whether a PIAP would actually pencil out for your patient panel? Contact American Exchange to set up an in-person planning meeting and walk through the revenue and retention model with your team.
Talk to an American Exchange ICHRA specialist for a free, no-obligation fit assessment. Learn more at https://enroll.americanexchange.com/ichra
Sources
The Trump health care policy red and blue states are embracing — Politico
What is an individual coverage health reimbursement arrangement (ICHRA)? — Healthinsurance.org
