May 25, 2025
Not Sure What to Expect
I attended the ICHRA conference hosted by Remodel Health in Indianapolis this week. Going in, I thought this was the first ICHRA conference organized. I was mildly surprised that this was the third installment.
The conference was positioned as “The ICHRA Conference.” Although professionally organized and well-run, it was small—maybe 400 attendees, probably closer to 300 if you exclude Remodel employees. To be honest, I breathed a sigh of relief: as a competitor to one of Remodel’s acquisitions, I would have found the nearest window and jumped out of it if I showed up and there were 4,000 people in attendance. I like what Remodel is doing. This was clearly a marketing event for their company, but veiling it as an industry conference and positioning themselves as a leader for the impending ICHRA (now CHOICE Arrangement) swell was smart.
I spent most of my career in structured finance, both on the sell-side as a mortgage trader and as a portfolio manager at a hedge fund. Prior to this, my only conference experience was attending asset-backed securities conferences. Everybody in attendance had a reason to be there. There were originators of financial products (mortgages, car loans, personal loans, etc.), Wall Street banks that packaged these financial products into securities and sold them to investors, and the investors themselves. Simply put, it was an opportunity for the investors to meet the originators and for the Wall Street intermediaries to boondoggle with both sets of clients. It made perfect sense.
The mix of attendees at the ICHRA conference was mostly brokers with a strong representation of insurance carriers. It was an interesting mix; I got the impression that nobody knew why they were there, but they felt compelled to attend. This didn’t make perfect sense.
The Broker’s Dilemma
I attended one of the breakout sessions for brokers. Designed as a roundtable discussion, the brokers were seated in a large circle of about thirty. The discussion was led by a designated broker, and Remodel fed the roundtable discussion prompts. Once prompted, the floor was open for discussion. The brokers in attendance who had actually implemented an ICHRA opened up about the challenges of implementing an ICHRA at scale. Seeing as everybody was being candid and forthcoming, I took the opportunity to ask leading questions.
“How much does selling an ICHRA pay you relative to group coverage?”
“How do you feel about not being the agent of record on the insurance?”
What I was really driving at was, “Why are you doing this?”
A broker answered it very simply and succinctly: “If I don’t sell the ICHRA to my clients, somebody else will.”
At minimum, ICHRAs are disruptive to insurance brokers’ business; at worst, they may pose an existential problem. So why are brokers knowingly participating in their own demise?
In much of the country, individual coverage is cheaper than group coverage. This was just hearsay bantered about at the conference, but group rates have been increasing by 20% annually over the last three years while individual rates’ annual increase has been closer to 10%. Here is what I do know: I know exactly how much individual coverage costs, because it is published on state and federal marketplaces. The pricing is completely transparent. On the other hand, there is nowhere to look up group rates. It is very simple: transparent pricing equals low pricing; obfuscated pricing equals high pricing. Why? If somebody is offering you a good price, they will tell you. It is just that simple.
Never mind that if a group with 100 employees has one sick employee, their premiums increase by 35%, forcing the conversation away from group insurance into the much larger pool of individual insurance.
Understanding the Large ICHRA Model
So with economics on their side, what are Remodel and their competitors doing? They are attempting to make ICHRAs look as close to group coverage as humanly possible. People are naturally averse to change. Trying to convince a company or their broker to try this ICHRA thing—if you have to explain what the ICHRA thing is, it’s a near-impossible task. But if I tell you that the ICHRA looks just like what you are doing now (group coverage) but a whole lot cheaper, that is a much more palatable pitch.
Here is the problem: ICHRAs are nothing like group coverage. With group coverage, employees are given one or two choices of insurance. If they accept it, the company pays for all of it in one “list bill” to the insurance company and then recoups the employee portion through a payroll deduction.
With an ICHRA, the employee, rather than the employer, purchases the insurance. Because of this, they can choose to purchase any plan they want to (it is illegal for an ICHRA administrator to tell them otherwise). Right away we have two problems.
The spirit of an ICHRA is to put the consumer in charge of their health care. They have never been in charge of their health care before. They now have 50 choices. They are going to have questions; they are going to have to learn. There is a concern, and rightfully so, that there are going to be employees at large companies that bang on their HR department rather than figure it out.
An ICHRA is a reimbursement arrangement; however, they do permit direct payments of medical expenses. How do I make it so that the company pays for everybody’s insurance when their employees could be using eight different carriers, seven of which don’t support payments by a third-party on an individual plan?
So what is the solution?
As an ICHRA provider, I am going to limit the employee choices to plans that look very similar to what they were getting with group coverage:
- So now the employees can be blissfully ignorant again, choosing between one of two curated choices similar to the two curated choices they had last year.
- The company is making a relative apples-to-apples choice on price (even though this is not how an ICHRA works—employers make decisions on allowances, not insurance prices; employees make decisions on insurance prices).
- And as agent of record, the ICHRA provider is limiting the conversation to two plans from fifty, and to one carrier from eight (explains why carriers are showing up to the ICHRA conference). And because they are limiting the choice to one carrier, we might as well pick the carrier that supports third-party payments, so that we can maintain a group-like workflow.
The ICHRA provider can’t force employees to choose these plans. So maybe they don’t tell them they have a choice. Maybe they tell them it will be operationally cumbersome for them to order off-menu. I pressed a Remodel employee demonstrating their software and asked, “What do you do when an employee buys insurance from the marketplace?” She said, “They can; it doesn’t happen often. We have ways of rooting them out before they go rogue.” Language such as “rooting them out” and "rogue" illuminates intent, but at least there was a general acknowledgment that employees have a choice. I have seen worse. We have had employers ask us if we will force their employees to get off their marketplace plans and onto our plans—presumably because that is what they were told by our competitors.
Large vs Small ICHRAs
This version of ICHRA looks nothing like what we do on the small-business side. I am a co-founder of Salusion; we create cost-effective software that simplifies the administration of ICHRAs and QSEHRAs for small business. The spirit of an ICHRA is to let employees choose insurance that fits them best and for the employer to set an amount they can afford to reimburse.
ICHRA for small business is an accounting and reimbursement business; ICHRA for large business is an insurance brokerage business. I think large businesses have structural advantages. First, large businesses have to offer insurance. Second, selling insurance pays better than selling software as a service. But it also requires a lot more support, and the price of support is cost-prohibitive for small businesses but easily absorbed by the savings for large businesses. On the small-business side, employers do not have to offer benefits, and if their employees are low-wage, they absolutely shouldn’t offer benefits; why would you replace your employees’ government subsidy when you don’t have to?
I don’t think ICHRAs for large businesses have to be run like today’s group coverage offerings.
Buying individual coverage insurance is not that complicated; employees on our platform do it—they all figure it out. I think if purchasing their own insurance on a marketplace with 50 options is all that employee ever knew, then an ICHRA with two curated choices or group coverage would be considered unacceptable. It would also lower the cost and increase the quality of the insurance.
One of the main pros of the group coverage model is the direct payment of insurance. It improves benefit utilization and streamlines the use of a cafeteria plan. It is shocking that insurance companies can’t support third-party payments of premiums—if there is something that a company should do extremely well, making it easy to get paid should be high on that list. The only way to do it today, without partnering with select carriers, is to do it through the employee: say, pay their bill with a virtual debit card. As a company, we have explored it; the likelihood is it would be an operational nightmare, and to make it work for the economics of small businesses, you can’t support edge cases.
Looking Forward
Going forward, I expect the two ICHRA models to drift toward one another. Today, large employers only accept ICHRAs that mimic group plans. For large ICHRAs to look like consumer-driven health plans, a couple of things must happen: employees must be viewed as capable of choosing their own insurance, and, at that point, smaller ICHRA platforms threaten their economics with a lower-cost, higher-choice model. On the small side, I think there will be a drift to some elements of group coverage, mainly direct pay. The drift will take place when carrier technology is in place (if there is VC reading this, we have thoughts on how to do this—holla at your boy) and does not threaten the low-cost model demanded by small business. This two-way drift will prove that ICHRAs can be both flexible and efficient, delivering better benefits with transparent pricing.
