How ICHRAs help advisors and employers navigate rate volatility

If 2026 makes anything clear, it’s that resilience requires a model that absorbs volatility instead of amplifying it. The individual coverage health reimbursement arrangement (ICHRA) does exactly that, creating stability on multiple fronts while positioning advisors as trusted problem-solvers in the face of mounting rate pressure.

Why ACA rates are going up

Industry analysis points to a few key drivers leading to the increase in individual market rates:

• Higher-than-expected claims from the past plan year.
• Potential expiration of enhanced premium tax credits at the end of 2025, which carriers have priced in as roughly an additional 4% increase.
• One-time market recalibration after several years of stable rates in the individual market (2020–2025).
• Impact of the cost of specialty drugs, such as GLP-1 medications, commonly used for chronic conditions like diabetes.

Group rates are rising, too—often faster

While a 15% individual market increase is significant, many fully insured group plans are seeing much sharper hikes: 30%, 40%, 50%, and in extreme cases, well over 100%. These swings can be unpredictable and financially destabilizing for employers — and advisors are often caught in the crossfire, expected to deliver solutions when renewals land.

ICHRA helps insulate both employers and advisors from these swings by:

• Shifting risk: Large claims no longer hit the employer’s plan directly.
• Providing budget control: Employers set a defined monthly allowance, keeping cost forecasting consistent year over year.

Moving healthier risk strengthens the pool

When employers adopt ICHRA — either as a full replacement for group coverage or through carve-outs — they move both healthy and high-utilization employees into the individual market together. This balanced shift helps stabilize the risk pool and can lead to more sustainable rates over time.

ICHRA rules also require employee classes to be defined in ways that ensure an equitable distribution of risk. These class structures prevent employers from isolating only higher-cost employees in the individual market, further supporting long-term market stability.

The off-exchange plan advantage

Despite all the headlines about on-exchange rate filings, one critical (and often overlooked) point is that many ICHRA participants enroll in off-exchange plans.

Off-exchange coverage offers several advantages in the current environment:

• Less impact from policy changes: Because subsidies don’t apply, off-exchange plans aren’t directly affected by tax credit expirations or adjustments.
• Potentially smaller rate changes: Without subsidy-driven pricing shifts, off-exchange products may see less volatility.
• Same ACA-compliance standards: Employees still get essential benefits and protections required under the ACA.

For benefits advisors guiding clients, this means the dramatic increases making headlines may not reflect the real experience for employers and their employees.

A note on affordability rates

Under the ACA, employer-sponsored coverage is considered “affordable” if the employee’s share of the premium for the lowest-cost self-only plan doesn’t exceed a set percentage of their household income. In 2026, this threshold will rise from 9.02% to 9.96%.

While this means employees could be asked to contribute slightly more, it also gives employers more flexibility to maintain predictable contributions — even in a year with above-average premium increases. Advisors can help clients balance affordability requirements with strategic reinvestments into HSAs, supplemental savings accounts, or other benefits that offset the impact for employees.

The real story for 2026 renewals

Concerns surrounding 2026’s ACA premium increases are valid. But the real takeaway is this: Ongoing volatility is the problem, not just this year’s spike. Despite the double-digit rate hikes expected this year, the individual market remains more stable than group, and experts expect it to settle back into single-digit annual increases after this one-time adjustment.

For employers, the fundamentals haven’t changed: ICHRA remains a strategic way to control costs, limit risk, and give employees more choice in their coverage. And for benefits advisors, it’s an opportunity to step forward as a trusted advisor, helping clients build resilience in the face of rate shocks and chart a steadier path for the years ahead.