ICHRA is scaling and 2026 HRA Council Data Report shows the market has reached another major milestone.
The HRA Council has released its fifth annual Growth Trends for ICHRA & QSEHRA report, providing one of the most comprehensive looks yet at how defined contribution health benefits are evolving across the United States.
And this year’s data tells a much bigger story than growth alone.
More than 20,000 U.S. businesses now offer an ICHRA or QSEHRA, and the report substantiates more than 500,000 employees with access to ICHRA, with additional dependents extending the reach even further.
But perhaps the most important development is what we’re beginning to learn about the people behind those numbers.
Employees are making active healthcare purchasing decisions. Larger employers are entering the ICHRA market at accelerating rates. Small businesses are using HRAs to offer health benefits for the first time. And emerging enrollment patterns are beginning to challenge some of the earliest concerns about what ICHRA might mean for the individual insurance market.
For Flyte HCM, this report is particularly meaningful.
Flyte has contributed data to each of the HRA Council’s five annual data reports, including the newly released 2026 report. This year, Flyte is one of 17 platforms contributing anonymized data to the analysis.
That gives us an opportunity not only to highlight what the report found, but also to share what we believe the data is beginning to tell employers, brokers, and the broader benefits industry about where ICHRA is headed.
ICHRA Growth Is Entering a New Phase of Scale
For several years, the ICHRA story has centered on adoption.
That’s changing.
The data suggests ICHRA is entering a new phase in which the conversation is increasingly about scale.
Employers represented in the report offering ICHRA grew from more than 6,600 in 2025 to more than 12,700 in 2026. Growth occurred across every employer-size category measured, from businesses with five or fewer employees all the way to organizations with more than 1,000 employees.
Large Employers Are Accelerating ICHRA Growth
Some of the strongest growth is happening among the largest employers.
Organizations with 1,000 or more employees increased 178% year over year. Employers with 200-499 employees grew 128%, while employers with 50-99 employees increased 111%.
ICHRA was never intended to be only a small-employer solution.
QSEHRA continues to provide smaller employers with an important pathway to offering health benefits. ICHRA, however, was designed to work across employer sizes, including Applicable Large Employers.
We are now seeing that potential materialize.
Small employers continue to represent the majority of employers adopting these arrangements, while larger employers can bring hundreds or thousands of eligible employees into the individual market with a single implementation.
That shift helps explain why the number of people being reached by ICHRA is accelerating so quickly.
ICHRA Now Reaches More Than 500,000 Employees
The HRA Council now substantiates at least 500,000 employees with access to ICHRA as of January 2026.
The words at least matter.
The Council describes its estimates conservatively because its annual analysis only includes data it can substantiate through participating data providers. The report estimates that this year’s data represents approximately 75% to 80% of ICHRA adoption, meaning the actual market is larger than what can currently be documented through the report.
ICHRA adoption also doesn’t stop when the annual Marketplace Open Enrollment period ends.
Employers can establish an ICHRA throughout the year, with newly eligible employees receiving a Special Enrollment Period to obtain individual coverage. The report’s January 31 measurement is therefore a snapshot of a market that continues moving throughout the year.
In other words, 500,000 isn’t the finish line. It’s a verified floor.
The ICHRA Effect: What Employee Choices Are Telling Us About the Individual Market
Growth alone, however, may not be the most consequential finding in this year’s report.
When ICHRA was introduced, one of the concerns raised was the potential for adverse selection.
Some questioned whether employers might disproportionately move older employees, who are generally associated with higher healthcare costs, from traditional group coverage into the individual market. If that occurred at scale, critics argued it could negatively affect the individual-market risk pool and contribute to higher premiums.
Several years of ICHRA enrollment data are beginning to show a very different picture.
In the 2026 HRA Council data, 56% of primary subscribers are under age 45.
And those employees aren’t simply choosing the least expensive coverage available.
Gold plans represent 34% of plan selections, followed by Silver at 32% and Bronze at 29%. Catastrophic coverage accounts for just 1%.
The spending data adds another dimension.
The median employer allowance in the report is $459 per covered life, compared with a median premium of $567. Most employees choose to contribute beyond their employer’s allowance, with a median additional contribution of approximately $105. Employer allowances are generally covering approximately 80% to 85% of the premium for employees’ preferred Silver, Gold, and Expanded Bronze selections.
But zoom out from the individual employee and the scale becomes remarkable.
In the report’s off-exchange sample alone, employers are contributing approximately $1.6 billion annually toward individual health insurance premiums. Employees are voluntarily contributing nearly another $400 million of their own money. Together, that represents nearly $2 billion a year flowing into individual health insurance premiums from just this portion of the ICHRA market.
Those numbers help illustrate what is actually happening as ICHRA scales.
Employers aren’t simply shifting employees into the individual market. They are bringing substantial employer-sponsored healthcare dollars with them, while employees are actively deciding how to use those dollars and, in many cases, choosing to invest more of their own money in the coverage they prefer.
Rather than simply accepting a health plan selected for them by their employer, employees using ICHRA can evaluate premiums, deductibles, provider networks, carriers, prescription coverage and other factors and decide which coverage best fits themselves and their families.
In other words, they’re becoming healthcare consumers.
The HRA Council describes the broader phenomenon as the “ICHRA Effect,” pointing to employee demographics, plan selection and spending behavior as indicators that ICHRA may be having a positive effect on ACA individual-market risk pools.
For Flyte, this may be one of the most important developments to watch.
The question surrounding ICHRA is no longer simply whether employers will adopt it.
As adoption grows, we’re beginning to have enough data to ask a much larger question:
What happens to the individual health insurance market when more employer-sponsored dollars and more employees enter it?
The early data is increasingly compelling.
ICHRA and QSEHRA Are Expanding Access to Employer-Sponsored Benefits
While large-employer growth may grab the headlines, small employers remain an equally important part of the story.
More than two-thirds of small employers offering ICHRA in 2026 previously offered no health coverage at all. Specifically, 70.5% of non-ALE ICHRA adopters came from no prior coverage.
For QSEHRA, that number reaches 93%.
These aren’t simply employers replacing one health benefit with another.
In many cases, HRAs are creating an employer-sponsored health benefit where one didn’t previously exist.
For a small employer that may have struggled with the cost, participation requirements, administration or unpredictability of traditional group insurance, defined contribution benefits provide another path.
The employer can establish a predictable healthcare budget while employees purchase individual coverage appropriate for their own needs.
At the same time, another market is emerging.
Among ALEs offering ICHRA in 2026, 21.6% had offered traditional group coverage the previous year.
That means we’re increasingly seeing two different ICHRA stories develop at the same time.
For many Small employers, ICHRA is a way to begin offering health benefits.
For larger employers, ICHRA is increasingly an alternative way to deliver them.
The same defined contribution framework is solving very different benefit challenges depending on the employer.
ICHRA Growth Is Being Reinforced by Strong Employer Retention
Adoption tells us how quickly a market is growing. Retention tells us whether employers find enough value in the solution to continue using it.
Among non-ALE employers offering ICHRA in 2026, 89.5% were renewing an ICHRA from the previous year. Among ALEs, 77.4% were ICHRA renewals.
The HRA Council describes this as the “stickiness” of the benefit: once employers adopt an ICHRA or QSEHRA, most continue offering it.
The report also identifies another interesting progression. Some small businesses begin with QSEHRA and later transition to ICHRA as their needs change, illustrating how defined contribution benefits can evolve alongside an employer.
For employers evaluating ICHRA, rapid adoption can demonstrate interest. Continued renewal provides another measure of whether the model is proving sustainable once employers actually experience it.
ICHRA Adoption Is Growing Across All 50 States
The growth isn’t isolated to a handful of individual insurance markets.
The HRA Council reports growth across all 50 states, although the underlying market dynamics differ significantly from one state to another.
California has the largest number of employers headquartered in the state that have adopted ICHRA or QSEHRA, while Ohio, Texas and Minnesota have the largest number of employees eligible for an employer’s HRA offer.
Arizona experienced a 655% increase in eligible employees between 2025 and 2026, driven primarily by ICHRA growth. Mississippi, New Hampshire and Delaware are also highlighted for strong momentum, while Colorado, Georgia, Maryland, Pennsylvania and Virginia are identified as states with particularly favorable or unique conditions for ICHRA growth.
State activity is becoming increasingly important as well, with policymakers in several states exploring ways to encourage or expand ICHRA adoption.
The result is increasingly clear: ICHRA is becoming a national market, but how that market develops will continue to have a distinctly local component.
What the 2026 Data Tells Us About the Future of ICHRA
Having participated as a data contributor in all five HRA Council annual data reports, we’ve had the opportunity to watch the questions surrounding ICHRA change along with the market.
The early question was whether employers would adopt it.
Then it became whether adoption could continue.
Today, we’re asking much more sophisticated questions about employer size, employee behavior, plan selection, contribution strategy and the effect of employer-sponsored individual coverage on the broader health insurance market.
The 2026 report doesn’t answer every question about the future of ICHRA, nor should it. But it provides increasingly meaningful evidence that defined contribution healthcare has moved well beyond an experiment.
For Flyte, the biggest takeaway is not simply that ICHRA is getting bigger. It’s that we’re beginning to understand what happens when it gets bigger.
And what we’re seeing deserves attention.
Source Note
Data and findings referenced in this article are based on the HRA Council’s Growth Trends for ICHRA & QSEHRA, Volume Five: 2025-2026. Flyte HCM contributed anonymized data to the report and has participated as a data contributor in all five annual reports.
