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The traditional group health plan is in crisis, with commercial insurance costs reaching record highs as factors like specialty medication spend, stop-loss insurance and behavioral health utilization continue to compound. Naturally, employers nationwide have been turning to alternatives such as direct contracting, narrow networks, and level funding, and one emerging option, ICHRA health benefits, has proven especially effective for at least one rural Indiana hospital.
What ICHRA Health Benefits Actually Offer
One of the emerging alternatives to traditional health insurance is ICHRA, or individual coverage health reimbursement arrangement, which lets employers give their workers a fixed, tax-free monthly allowance to buy their own coverage on the ACA marketplace instead of enrolling in a company-sponsored plan. This structure gives employees direct control over their coverage choices rather than locking them into a single employer-selected plan.
Rush Memorial’s Switch to ICHRA
Rush Memorial, a 25-bed critical access hospital in Rushville, Indiana, made that switch in late 2024. Brian Bane, the hospital’s vice president of human resources, believes it was the first hospital in the state to move its entire workforce to an ICHRA health benefits model. “The old traditional employer-based model was putting us in a pinch, so it made sense, when I worked with my broker, to ask what we could do,” Bane told Becker’s. “It’s almost like creating an a la carte choice of healthcare benefits.”
Measurable Savings From ICHRA Health Benefits
For Rush, the shift has produced a 45% reduction in healthcare spend, or just under $2 million in annual premium savings. Bane noted that the savings compound each year rather than representing a one-time budget win, a meaningful distinction for hospital leaders weighing whether ICHRA health benefits offer sustainable long-term value rather than a short-term fix.
Reinvesting Savings Into Patient Care
Perhaps most importantly, the hospital is directing that money back into patient care rather than treating it as a windfall. “We’re putting the savings toward new service lines or new tools for our staff to take care of our patients, which prevents cuts that were being discussed back in 2023,” Bane said. “Those have gone away now.” One example is a new real-time communication system for nurses, described as a six-figure investment that had been held up due to lack of funding. “I don’t know if we would have even been able to consider it without the cost savings of the past couple of years,” he said. “A nurse being able to communicate from med-surg to the ER, or vice versa, immediately, is huge for us.”
Enrollment and Adoption of ICHRA Health Benefits at Rush
Rush offered the ICHRA to all 370 of its employees, from entry-level staff to its C-suite and board of directors. About 220 employees and their dependents have now enrolled, and the hospital is heading into its third year with the model after previously carrying coverage primarily through UnitedHealthcare. Other small and mid-size hospitals have reached out to Rush to learn more about ICHRA health benefits, and some have even made the same switch this year.
A Snowball Effect Among Peer Hospitals
“A lot of people reach out to and ask questions about ICHRA, because there are a lot of unknowns, and I feel like with all these conversations happening, it’s having a bit of a snowball effect,” Bane added, suggesting growing peer-to-peer interest in ICHRA health benefits among similarly sized rural hospitals.
Addressing Network Adequacy Concerns With ICHRA Health Benefits
Network adequacy was an early concern given the hospital’s rural footprint in a community of around 6,000 people. Though 60% of Rush’s employees live in the surrounding area, the hospital has workers spread across three states. Bane said employees have access to six insurers on the marketplace, and about 60% of the workforce ultimately chose an Ambetter plan from Centene.
A Rapidly Growing National Market
First authorized under a federal rule that took effect in 2020, the ICHRA model appears to be climbing quickly, especially among small businesses, though little data from non-industry sources is available. According to the HRA Council, ICHRA use is up more than 1,000% since 2020, with the overall market possibly now containing up to 1 million people, signaling substantial national momentum behind ICHRA health benefits beyond just the hospital sector.
ICHRA Health Benefits as a Recruitment and Retention Tool
Beyond the dollar figures, Bane said the switch gave Rush’s workforce more flexibility to pick coverage suited to their specific needs, which also serves as a recruitment and retention benefit. “I’m talking about a brand-new CNA fresh out of school, to a mid-career nurse with kids, to nurses who are near retirement,” he said. “What can you offer your employees so they don’t shop around for other jobs? That’s a unique benefit.”
Overcoming Early Adoption Challenges
Still, breaking the mold around a decades-old model for healthcare benefits is not an easy task, and some Rush employees needed time and resource support to navigate the switch to ICHRA health benefits. “Word of mouth has been getting out though, to the point where some employees whose spouses have employer-based benefits are bringing their spouses onto our plan,” Bane said. “That would have been a big risk under our old plan, but now we say bring it on.”
