One odd thing could help cash-for-coverage plans thrive, health policy specialist says

Today, Fronstin writes, many employers are unfamiliar with ICHRAs, only about 13,000 offer employees access to ICHRAs or similar arrangements, and only about 300,00 to 700,000 workers and dependents are actually using cash from a formal cash-for-coverage plan to buy individual health coverage.

Fronstin warns against assuming that cash-for-coverage plans will take off.

One concern is the risk that the plans could destabilize the group health insurance market, by causing the employers with the sickest employees to push those employees toward one unlucky part of the group health market, Fronstin says.

Fronstin thinks that, if cash-for-coverage plans do get a chance to shine, the main driver could be a recession.

If the U.S. economy entered a recession, that could be the first time that U.S. employers would go into a severe downturn at a time when the Affordable Care Act lets all Americans, including sick Americans and Americans facing conditions such as obesity, buy individual major medical coverage without fear of medical underwriting.

"That combination could encourage some employers to finally abandon group health coverage in favor of [defined contribution] models like ICHRAs," Fronstin writes.

The retirement plan comparison: Fronstin notes that promoters of 401(k) plans faced soft demand early on.

Employers preferred to stick with traditional defined benefit pension plans.

Fronstin included a chart showing that defined benefit pension plans continued to have more participants than defined contribution retirement plans until about 1988 — when a wave of savings and loan failures caused a slump that lasted until the early 1990s.

When the country emerged from the slump, workers were suddenly more likely to have stand-alone 401(k) plan accounts than stand-alone pension benefits.

The ICHRA market backdrop: Executives from Oscar Health recently said during a conference call with securities analysts that it would work with Hy-Vee, a big supermarket chain, to add an ICHRA program in the Des Moines, Iowa, area.

Related: Employers' ICHRAs will help individual health survive subsidy cuts, execs predict

The companies are now teaming up to market the Hy-Vee Health with Oscar program through Iowa's public health insurance exchange program.

The companies are predicting that small employers that switch to the program will cut health benefits spending by more than 20%.

Other companies have also been aiming at the ICHRA market. Many have raised big sums from venture capital firms and private equity firms.

One new headwind is the failure of ICHRA supporters to get an ICHRA rule overhaul provision included in the One Big Budget Bill Act tax and spending package.

Today, an employer must offer an employee either an ICHRA plan or traditional coverage. The provision left out of the OBBBA package would have let an employer offer both traditional coverage and a "custom health option and individual care expense arrangement" cash-for-coverage plan, or CHOICE arrangement, at the same time.

ICHRA supporters are hoping Congress will enact the CHOICE arrangement provision in a new package or in the form of a stand-alone bill.

Green fields and cannibals: For now, Fronstin writes, it looks as if cash-for-coverage plans might be more likely to tempt employers with no health benefits than to cannibalize employers that are trying to save money on existing health benefits programs.

An HRA Council survey found that 83% of HRA plan sponsors did not previously offer health benefits, he says.