2023 saw an increase in Individual Coverage Health Reimbursement Arrangement (ICHRA) and PEO utilization of the Health Reimbursement Arrangement (HRA) market. Still, overall penetration in the market remains lower than what we think the potential is. Change management, individual plan enrollment, and the need for more technology to create a seamless user experience have all limited growth in the group broker and PEO markets.

• 2024 as a Moment of Transition for Group Brokers and PEOs: As HRAs become more popular, group brokers and PEOs must form strong partnerships with HRA platforms and providers. Advances in technology and automation are set to make onboarding and managing HRA plans easier. We expect to see group brokers and PEOs using HRAs more often to meet the changing needs of their clients.

• ‍Group Market Rates Outpace Individual Market Rates, Creating Cost Pressure for Brokers: As group market rates consistently rise faster than individual market rates, it is more expensive for brokers to provide benefits to group clients. To cope with rising rates, brokers are exploring solutions like the ICHRA to offer cost-effective benefits. The changing market dynamics highlight the need for brokers to find innovative approaches to ensure that quality benefits remain accessible for groups.

• ICHRA's Flexibility as a Key Selling Point for Groups Facing Challenges: Group brokers working with clients with specific challenges, such as minimum participation struggles, an aging workforce, and diverse classes of employees, are increasingly relying on the flexibility offered by ICHRA as a key selling point. ICHRA's adaptability becomes a strategic advantage for brokers in addressing the unique needs and complexities of groups with diverse workforce characteristics.

• Need for Enhanced Tools and User Experience for Group Brokers: Despite the growing adoption of HRAs, there is still a need for more comprehensive tools and an improved end-user experience for managing HRAs. Technological advances in the market promise to make it as straightforward to offer an HRA as a group plan, although we're not there yet. More work is needed to give group brokers the platform that will allow them to pitch HRAs as viable solutions. Group brokers can partner with HRA providers to ensure the creation of impactful tools that streamline the HRA management experience.

Examining the challenges of HRAs amid an abundance of health insurance enrollment options demands a delicate balance for companies, considering the advantages and challenges posed by endless selections, the complexities of Specialty HRAs, and the evolving dynamics and cost pressures within the individual health market.

‍Health Insurance Enrollment and Endless Selections

The abundance of health insurance enrollment options and the myriad of choices can present both advantages and challenges for companies contemplating a transition to the HRA. While the flexibility to choose from a range of plans caters to diverse employee needs, it also introduces complexity in decision-making. 



Navigating through numerous selections requires careful consideration of factors such as cost, coverage, and individual preferences. Striking the right balance between providing choices and simplifying the decision-making process becomes crucial for companies aiming to optimize the benefits of HRAs without overwhelming employees.

Specialty HRAs: Powerful, But Complicated

Specialty HRAs can be compelling tools designed to address specific and unique needs within a workforce. However, unleashing the full potential of Specialty HRAs requires a thorough understanding of the intricacies involved. These HRAs demand a high level of customization and expertise from providers, going beyond the standard offerings. Customizations must account for local conditions and the varying care costs in employee regions. Additionally, comprehensive plan documents are vital, ensuring both regulatory compliance and the plan's cost-effectiveness. 



Coupling Specialty HRAs with stop-gap coverage and other insurance options can be an affordable and novel way to provide comprehensive benefits. Employers should carefully evaluate their HRA providers to ensure they possess the expertise and capabilities to navigate these complexities seamlessly.

‍Individual Health Market Dynamics and Cost Pressures

Changes in the individual health market and rising costs could significantly impact the penetration of the HRA in the insurance market.  If rate increases in the individual market start to mirror those in the group market, it would negate the potential cost savings of switching to an HRA for both small and large employers.  



Employers should carefully assess market trends and rate changes to ensure that adopting HRAs remains a financially beneficial choice. 

Amidst rising group rates, the HRA gains allure as a cost-effective solution, while state incentives, customized HRA solutions for precise cost control, and technological advancements for brokers and PEOs signal a transformative era in benefits strategy and healthcare cost management.

Continued Cost Pressure in the Group Market

As group rates continue to rise, the HRA is becoming a more attractive option for groups of all sizes. HRAs offer flexibility and cost-effectiveness, making them a strategic solution for employers looking to manage expenses in the group market.

State Incentives for HRA Utilization

Some states, taking cues from pioneers like Indiana, are expected to encourage more companies to adopt HRAs. This state support could tip the financial scale, favoring HRAs as a preferred benefits strategy.

Full Customization of HRA Solutions for Cost Control

Tailoring HRAs to meet the specific needs of a workforce emerges as a powerful strategy for controlling healthcare costs. Companies can customize HRAs to align precisely with employee requirements, making HRAs a strategic tool for cost containment.

‍Technology Improvement for Brokers and PEOs

Advancements in technology, especially those designed for brokers and Professional Employer Organizations (PEOs), will simplify processes and enhance efficiency in the HRA market. These technological improvements aim to make HRAs more accessible and user-friendly, contributing to the growth of HRAs in the market.

What factors limited the overall penetration of HRAs in the market despite increased utilization?

The overall penetration of HRAs remained lower than expected due to challenges such as change management, individual plan enrollment, and the need for enhanced technology to create a seamless user experience for group brokers and PEOs.

How are rising group market rates impacting brokers, and what solutions are they exploring?  

Rising group market rates pose cost pressures for brokers, leading them to explore solutions like the Individual Coverage Health Reimbursement Arrangement (ICHRA) to offer more cost-effective benefits to group clients.

What makes ICHRA's flexibility a key selling point for group brokers facing challenges?

Group brokers increasingly rely on the flexibility offered by ICHRA as a key selling point, especially when dealing with challenges like minimum participation struggles, an aging workforce, and diverse classes of employees.

‍What are the complexities involved in unleashing the full potential of Specialty HRAs?

Specialty HRAs require a high level of customization and expertise from providers beyond standard offerings. To ensure regulatory compliance and cost-effectiveness, customizations must account for local conditions, varying care costs, and comprehensive plan documents.

‍What are the critical areas of opportunity and growth for HRAs in 2024?

In 2024, rising group rates make HRAs an attractive and cost-effective solution, with opportunities for growth in state incentives, customized HRA solutions for cost control, and technological advancements benefiting brokers and Professional Employer Organizations (PEOs).

Our team knows the ins and outs of the health insurance marketplace and will guide you towards the solution that make the most sense for your business and your team. Come with questions! Our experts are happy to dig into the details to get you the clarity you need.

During the call, Liferaft will run a cost-benefit analysis on your company's current healthcare spending and show you different ways you can save—without sacrificing plan quality. After your consult, Liferaft will design a unique plan for your employee's health insurance, including suggested plans and accounts, plan policy documents, and the annual budget.