ICHRA Becomes the Foundation for Modular Benefits as Employers Face Rate Shock

ICHRA gets the most attention as a cost play. But for a growing number of brokers and employers, its real power is structural. It provides the compliance framework that makes it possible to assemble a modular benefits stack around direct primary care, pharmacy discounts, and catastrophic coverage. The employers getting the most from ICHRA are the ones who stop treating it as a plan and start treating it as the foundation for a redesigned benefits experience.

Sims Tillirson is the Founder and Principal of Tillirson Consulting Group, a go-to-market and sales consulting firm focused on the employee benefits ecosystem. With experience spanning Colonial Life, Alight Solutions, and multiple high-growth benefits vendors, Tillirson has spent a decade inside carriers, enrollment firms, and benefits tech companies from pre-seed to Fortune 500. That breadth gives him an unusually practical lens on where ICHRA fits and where it falls apart.

"I don't look at ICHRA the same way I look at level funding or fully insured or self-funded. It's this very tight compliance vehicle that you can wrap a lot of good things around and actually help Americans have more affordable, more accessible health care." Tillirson's shift on ICHRA came after he tried and failed to sell it broadly. The turning point was narrowing his focus to employers who genuinely need it: mid-market groups with 25 to 300 lives facing steep renewal increases and limited carrier options. For those employers, the choice is binary. Take the increase, shop for a similar one, or try something different.

• The sweet spot: "Groups 50 to 250 lives that have received a 20-plus percent rate increase recently, they don't have options," Tillirson says. "Their option is take the increase on the chin, shop it with another carrier that's going to give a similar increase, or do something crazy. And it's very unlikely they can be self-funded. So the last option is ICHRA."

• Where it doesn't fit: Larger, truly self-funded employers without major increases are often poor candidates. "They're not going to be able to give their employees a similar or better experience," Tillirson says. "That becomes a PR nightmare."

The real differentiation comes after the ICHRA decision, when employers build the surrounding solution stack. Tillirson points to a 230-life group that used ICHRA to save $1.5 million and then reinvested those savings into care access tools: a virtual primary care vendor on the front end, a prescription drug discount card, and local direct primary care where available.

• Keep it simple: "I didn't get too complicated with it. I built it the way I manage my own health care," Tillirson says. The stack is designed to ease the transition for employees who now spend from a healthcare allowance rather than relying on first-dollar coverage.

• Humans over tech: The administrator matters, but Tillirson warns against going all-digital. "I'm not a person that believes that exclusively tech is going to be the thing that helps employees grab onto this," he says. Employees moving to non-insurance products need to understand what that means and how to navigate their new benefits.

The most consequential question for plan sponsors is intent. Tillirson draws a hard line between employers using ICHRA as a one-year Band-Aid after a bad renewal and those making a strategic decision to exit the traditional health insurance model. The answer determines everything.

• Band-Aid versus inflection point: "If you tell me you just want to use ICHRA because you had a bad year and you're going to shop it again next year, I'm probably not going to build this really robust stack. It's probably going to be a Band-Aid," Tillirson says. But for employers at an inflection point, the stack gets deeper and the employee education gets more intentional.

• Think like car insurance: Tillirson coaches employees to treat their coverage like auto insurance rather than all-access passes. "My guidance is for them to manage their health care more like car insurance. You're not filing claims for every little thing. You're being proactive about how you manage your health." Direct primary care anchors that shift, offering unlimited visits for a flat monthly fee while incentivizing prevention over reactive spending.

Tillirson sees ICHRA adoption still firmly in the education phase. Most brokers and plan sponsors he talks to have never heard of it. His long-term estimate puts market penetration around 15% at maturity, lower than the more bullish projections floating around the industry. But the opportunity he is most excited about goes beyond ICHRA itself.

"I'm excited about people learning ICHRA, not stopping there, and building solution packages that actually support employees and help them be better consumers of health care," Tillirson says. "I think a return to personal responsibility is a good thing. Our system currently doesn't incentivize that. ICHRA opens the door for it."