States Adopt Trump-Era Health Reimbursement Policy

S. states are implementing a health policy initiated during the Trump administration to boost enrollment in Affordable Care Act (ACA) plans. This strategy, known as Individual Coverage Health Reimbursement Arrangements (ICHRAs), enables employers to provide tax-exempt funds to employees for purchasing individual health insurance, rather than offering traditional group health plans.

This development comes as enhanced federal subsidies for ACA coverage expired in late 2025, prompting states to seek alternative methods to reduce uninsured populations.

Bipartisan State-Level Initiatives

At least six states are actively considering or have already adopted tax credit incentives to encourage businesses to utilize ICHRAs. This bipartisan approach aims to address rising uninsured rates and manage state Medicaid expenditures. Connecticut Governor Ned Lamont, a Democrat, has included a tax credit incentive for small employers adopting ICHRAs in his proposed 2026-27 budget.

Ohio State Representative Meredith Craig, a Republican, is sponsoring similar legislation that has successfully passed the state House. Indiana was an early adopter, enacting a law supporting ICHRAs in 2023. This cross-party support highlights a shared objective to enhance healthcare access and affordability at the state level.

Evolution of ICHRA Policy

ICHRAs were formally established in 2019, providing a new mechanism for employers to contribute to employee healthcare costs. Their adoption has accelerated since 2023, as businesses increasingly seek flexible and cost-effective solutions for health benefits amidst rising healthcare expenses. This policy allows employers to define a fixed contribution amount, giving employees more choice in selecting individual health plans that best suit their needs.

Major insurers, including Oscar Health and Centene, are developing specialized health plans tailored for individuals participating in ICHRA programs. This market response indicates a growing acceptance and integration of ICHRAs within the broader health insurance landscape. The policy is viewed by many proponents as a sustainable, long-term solution for healthcare affordability, distinguished by its rare bipartisan consensus.

Addressing Uninsured Rates and Costs

States are turning to ICHRAs as a tool to mitigate the impact of expiring federal subsidies on ACA enrollment. The end of these subsidies could lead to an increase in the number of uninsured individuals, placing additional strain on state healthcare systems and budgets. By incentivizing ICHRA adoption, states hope to maintain or even expand health insurance coverage among their populations.

This policy also offers a potential avenue for states to manage their Medicaid costs. By encouraging more individuals to transition to private insurance through employer-funded ICHRAs, states could reduce the burden on publicly funded healthcare programs. The flexibility and tax advantages associated with ICHRAs make them an attractive option for both employers and employees in the evolving U.S. healthcare market.

Implications

Country Impact: The nationwide adoption of ICHRAs could lead to a more diversified health insurance market, potentially reducing the number of uninsured Americans. This shift may also influence federal healthcare policy discussions, highlighting state-level solutions.

Industry Impact: The health insurance industry is adapting by developing specialized plans for ICHRA participants, indicating a new growth area. Employers, particularly small businesses, may see reduced administrative burdens and more predictable healthcare costs.

Market Impact: The increased use of ICHRAs could stimulate competition among individual health insurance providers. This policy might also impact state budgets by potentially lowering Medicaid expenditures and creating new tax credit programs.