State Incentives And A Major First Mover Could Unlock ICHRA Adoption At Scale

On paper, ICHRAs offer an obvious financial off-ramp for small group employers battling consistent year-over-year premium increases. But a closer look at the market reveals a classic standoff. Employers want the financial relief ICHRAs provide, but they refuse to jump into an unstable ACA market. The ACA market, meanwhile, may struggle to stabilize until those healthier employer populations actually jump in. As a result, the entire ecosystem is stuck in a holding pattern, waiting on the sidelines for someone else to move first.

Martin Cech is tracking the exact mechanics of that hesitation. As the Lead Policy Research Analyst at Health Tech Nerds and author of the Weekly Health Policy Briefing newsletter, Cech monitors the intersection of Medicare, Medicaid, and ACA policy. His background spans health care strategy and operations, including roles as Lead Corporate Strategist at Synapse Medicine and an Affordability Researcher advising senior leadership for Colorado's $10 billion Medicaid department (HCPF). In his view, ICHRA currently sits inside a genuine catch-22.

"It would be hugely stabilizing to the market if ICHRA was broadly adopted, but it's hard for ICHRA to get broadly adopted with the unstable market," he says. That circularity is the central problem, and understanding why it persists requires looking at both the demand signals and the structural barriers underneath them.

The demand is real, but the data is thin

Employer interest in alternatives is not in question. What's missing, Cech says, is reliable data on how much of that interest is converting into actual ICHRA enrollment. The public companies offer fragments. Oscar Health mentioned on an earnings call that its ICHRA enrollment doubled year over year, though without sharing the base, which Cech reads as a likely sign that the starting number was small. "When we talk to people in the private markets, they say ICHRA is still small, but the growth is strong and the demand is strong. We just don't have good signals on that from any of the public companies that I feel like I could trust."

The caution against overreading the moment is deliberate. Cech believes the single most foolish prediction in American healthcare is that employer-sponsored insurance is finally about to break. "Employers have seemingly unlimited appetite to suffer when it comes to these things," he notes. That belief tempers the temptation to read rising group costs as an automatic ICHRA tailwind. The interest is logical, but logic has not historically been enough to move employers off a model they know.

The instability problem is structural

The reason the individual market feels risky to employers comes down to who's in it. Cech describes a market shaped into one for adverse selection: the people most motivated to buy individual coverage tend to be those who most need it and are willing to pay for it, which is precisely the risk pool insurers find hardest to price.

The market also skews toward lower-income, Medicaid-adjacent enrollees, particularly in large states that never expanded Medicaid. "You're insuring what is a quasi-Medicaid population," he explains. "If you could somehow take the employer population and put it in that market, the market would be so much more attractive for insurers, and prices could possibly go down."

That's the stabilizing logic behind broad ICHRA adoption. Employed populations, especially in white-collar roles, represent more attractive risk than the typical current exchange enrollee. Moving them into the individual market in volume would improve the risk pool and moderate premiums. But the instability that broad adoption would cure is the same instability that keeps employers from adopting in the first place.

What would make the market tip

For larger employers to move at scale, Cech's view is that the ACA market needs to stabilize first, and the clearest proxy would be individual-market premium growth running below the group and small-group growth rate for a few years. Some of the barrier is also perception. The news employers hear about the exchanges skews negative, which makes the prospect of moving employees onto them a difficult internal conversation regardless of the underlying economics.

The path to a tipping point likely runs through specific employer types and geographies before it becomes general. Cech expects the early movers to be high-cash-compensation employers rather than those with large blue-collar or union-heavy workforces, where the change management friction is greater. "I could imagine a company with really high cash comp saying, 'Look, we'll put this money in an HRA and you can shop with it.'"

Geography matters because of how insurance is regulated and where employers cluster. A critical mass of adoption at the state level, even regionally, could begin to moderate premium increases and make the market more attractive in a self-reinforcing way. Cech points to Connecticut, where the governor's proposed budget includes additional incentives for small-business ICHRA adoption, as the kind of state-level lever worth watching.

He frames the most useful metrics to track in order: the top-line adoption number as a percentage of the broader ACA market, then geographic dispersion, then the type of employer adopting. A collective-action dynamic underlies all of it, with employers waiting for a major name to move first. "Everyone is staring at each other saying, 'I would like to do this, but I need Walmart to do it first.'"

Carriers are positioning, not betting big

The wave of carriers adding off-exchange plans might look like a strong signal of conviction, but Cech reads it as low-cost positioning rather than a major investment. Adding an off-exchange plan often carries little to no marginal cost, since carriers frequently take an existing on-exchange plan and market it off-exchange as well. "It is a bet. They're saying 'we are open for business if people want to come.' But it's not a large bet. It is just positioning themselves to capitalize on the ICHRA wave if it happens," he says.

That distinction matters for reading the market. The breadth of off-exchange offerings reflects readiness to serve demand, but isn't necessarily a prediction that demand has arrived. The carriers are hedging, keeping themselves positioned for whichever way the market moves rather than committing to ICHRA as a near-term growth engine.

The throughline across demand, instability, and carrier behavior is patience. The conditions that could unlock broad ICHRA adoption are visible, and the policy levers that would accelerate it are identifiable. What remains uncertain is whether the market stabilizes enough, fast enough, for employers to stop waiting on each other.