This Groundbreaking Insurance Reform Is Buried In The Big, Beautiful Bill

There are more than 40 healthcare provisions in the One Big Beautiful Bill Act (OBBBA) that passed the House of Representatives by a one-vote margin last month. One, in particular, deserves more attention than it is getting.

The legislative package would codify and expand Individual Coverage Health Reimbursement Arrangements, which the first Trump administration introduced in 2019. ICHRAs allow employers to give workers untaxed dollars, which they can use to purchase health insurance on the individual market.

In many ways, ICHRAs are the health insurance equivalent of retirement accounts to which employers make defined contributions. These accounts have the potential to make health insurance more accessible and affordable for not just employees but employers, too.

As the Manhattan Institute’s Chris Pope notes in a recent study on ICHRAs, 117 million Americans between the ages of 19 and 64 received insurance from employers in 2023. Just 16 million bought insurance on the individual market.

In some ways, this makes sense. Employer-sponsored health insurance is familiar. Enrolling in an employer plan spares workers the hassle of having to navigate the individual market.

But today, health insurance is actually cheaper on the individual market than when purchased by employers.

So employers embracing ICHRAs could save themselves and their employees a lot of money.

And by putting individuals in charge of their own health insurance needs, ICHRAs can unleash the kind of market forces that help drive down costs and improve value in every other sector of the economy.

People are more responsive to market signals when they are enrolled in individual market plans. One study found that a 1% premium increase leads to a 1.7% drop in individual market plan enrollment. By contrast, a 1% premium increase in the employer market causes enrollment to drop by between 0.2% and 0.8%.

This finding reveals one of the main problems with employer-sponsored insurance—it obscures the cost of health coverage. Employees have no incentive to seek out more affordable providers or services when someone else is paying the bill.

Providers are aware of this market dynamic, which means they are constantly, as Pope puts it, “needlessly inflating costs.” That’s why, he goes on to note, “Starbucks spends more on health care for its workers than it does on coffee.”

Increased adoption of ICHRAs would disrupt this status quo. Employers’ costs would decline. Employees spending their ICHRA money would have a strong incentive to pick a health plan that suits their needs and budget, rather than the one-size-fits-all plan that most employers offer now.

And by putting consumers in charge of their own healthcare dollars, ICHRAs could foster the kind of competition among both insurers and providers that drives down costs and improves value over the long term. One study found that expanding the number of plan options for employees can provide benefits equal to 13% of premiums.

Decoupling health insurance and employment has a number of downstream benefits for workers of all stripes.

For instance, it encourages entrepreneurship by giving people the security to leave their jobs without fear of losing health coverage. And it offers a suitable coverage option for part-time workers, only 26% of whom currently receive health insurance from their employers.

ICHRAs could also make it more financially realistic for small businesses to offer health benefits. Just 56% of those who work for firms with fewer than 50 employees get an offer of insurance through their jobs. Cost is typically the chief impediment. ICHRAs would help remove that barrier.

These accounts have only been around for five years. But Americans are waking up to their benefits. Around 500,000 people were enrolled in ICHRAs in 2023. The nonpartisan Congressional Budget Office estimates that around 2 million workers will be enrolled in these plans by 2032.

And that’s if nothing else changes. If the big, beautiful bill passes as written, it will rebrand ICHRAs as CHOICE plans—a less confusing acronym that experts hope will encourage more businesses to adopt them.

After codifying Trump’s ICHRA rule in law, lawmakers could consider something like Pope’s proposal for a Worker’s Choice ICHRA, which would allow employers to offer both ICHRAs and traditional insurance plans by guaranteeing coverage parity between the options.

Americans deserve more choice in their health benefits. Expanding access to ICHRAs would give it to them.