What does the presidential election mean for ICHRA and the health insurance market?

Over the past two presidential administrations, the health care market has changed dramatically with the introduction of the individual coverage Health Reimbursement Arrangement (ICHRA). ICHRA was launched on Jan. 1, 2020, allowing employers to provide a monthly, tax-free allowance to employees to purchase health insurance on the individual market.

While health care policy in general remains a highly partisan political football, ICHRA has remained steadfastly bipartisan — it just makes sense. However, the broader health care policies that would likely be implemented under a second Trump administration or a Harris administration could have a profound impact on ICHRA. Let’s take an early look at how these candidates and their party platforms might influence the ICHRA market going forward. 

This article was originally published on STATNews on Sept. 13, 2024.

Tax credit complications

Before diving into the candidates and their platforms, there is an imminent issue in Congress that could affect the market regardless of who is in the White House: the expiration of enhanced tax credits in 2025. The Inflation Reduction Act, enacted in 2022, extended tax credits first established in the Covid-19 Stimulus Package; those tax credits increased subsidies for low-income households, extending coverage to an estimated 2.5 million people. The tax credits were a key driver of the individual market’s growth from a paltry 14.1 million people in 2020 to more than 21 million in 2024. 

In general, Democrats have favored continuing the increased tax credits, while Republicans are more likely to allow them to sunset. If the tax credits go away, it’s likely that many people — particularly those in good health — will drop their ACA plans due to high costs and seek out alternatives. When the individual market shrinks, it reduces the competitiveness and quality of individual plans, detracting from the appeal of ICHRA.

On the other hand, the loss of these tax credits means that employees (particularly those doing hourly work) would benefit from receiving tax-free dollars from their employer since they would no longer be eligible for government tax credits. We may see employers that are currently hesitant to implement a health reimbursement arrangement (HRA) come back to ICHRA or QSEHRA (the program designed specifically for small businesses) to support their employees.

When the enhanced tax credits first went into effect in 2021, some industry observers thought that the HRA market for employers would shrink as employees could get a better deal with tax credits. This prediction didn’t come to pass — ICHRA and QSEHRA adoption continued to grow. As long as the ACA market remains sufficiently competitive — even with sunsetting tax credits — we should expect these HRA programs to continue to grow.

How will a Kamala Harris administration impact ICHRA?

Democrats generally support ICHRA because it adds members to the ACA marketplace, increasing the risk pool and the competitiveness of plans in the process. While Kamala Harris was a proponent of universal health care when she first ran for president in 2020, she and the Democratic Party platform now aim to achieve “universal” health care by backing a public option in the ACA market. A public option could take many forms, but in general would establish a government-run plan that competes alongside private insurers in the public marketplaces.

If the ACA marketplace remains competitive, the introduction of a public option could be beneficial for ICHRA — it would give employees more options, particularly in parts of the country where there’s not much private competition. Of course, any policy that moves away from a marketplace structure would have to cause a complete overhaul of health care in the U.S. as we know it today.

A Kamala Harris administration should be good for ICHRA and its continued expansion. However, there are risks from special interest groups on the left that challenge ICHRA as a Trump-era policy that should be reversed. These groups fail to see that ICHRA evolved out of the Obama administration’s lesser-known QSEHRA policies for small businesses. These activists may be able to gain a new Democratic president’s attention, but sweeping changes are unlikely.

What are the implications of a second Trump administration for ICHRA?

Republicans support ICHRA because it is market-based and gives employees more choice. While the Republican platform is fairly high-level, the party commits to “promoting choice and competition” — a potential positive for ICHRA when compared with traditional group plans. In fact, Republicans sponsored the CHOICE Arrangement Act to write the ICHRA regulations into law, a strong signal about their commitment to the program.

However, a second Trump administration does pose long-term threats to the stability and growth of HRAs. A Trump White House and Republican Congress could renew their efforts to undermine the ACA marketplace, which ICHRA relies on to deliver quality plans. A Republican administration may also expand ICHRA’s rules in ways that go beyond what is currently supported by both parties: allowing ICHRA to work with non-ACA plans could damage the markets and prompt Democrats to try to undo ICHRA as a whole.

As with a potential Harris administration, ICHRA should continue to thrive as long as policies don’t move too far in either direction in a second Trump Presidency.

Growing on a stable foundation

Building on a bipartisan background, ICHRA and QSEHRA are steadily gaining momentum and allowing more Americans to access quality healthcare. According to recent research from the HRA Council, ICHRA adoption grew by 29% year-over-year from 2023 to 2024. More importantly, these HRAs are allowing many employers to provide health care benefits to their employees for the first time: the HRA Council report found that 83% of employers adopting ICHRA or QSEHRA offered no previous coverage to their employees.

Either Harris or Trump could enact changes to the health insurance market that bump HRAs off their path to growth. By staying the course and pursuing improvements with bipartisan support, both candidates can increase access to health care and support American businesses. 

Jack Hooper is the CEO and co-founder of Take Command, which sells ICHRAs administration software.