Preliminary filings show ACA individual market premiums could rise by an average of around 15% nationwide in 2026—the largest proposed increase since 2018. Some states may see even higher spikes.
The headlines sound alarming, but this isn’t the start of an endless upward climb. In fact, most experts anticipate that after 2026, annual changes will return to a more typical single-digit range.
For employers considering or already offering an Individual Coverage Health Reimbursement Arrangement (ICHRA), these shifts don’t change the fundamentals: ICHRA still delivers predictable budgeting, reduced risk, and access to competitive plan options for employees.
First: Why rates are going up
Industry analysis points to a few key drivers:
- Higher-than-expected claims from the past plan year.
- Potential expiration of enhanced premium tax credits at the end of 2025, which carriers have priced in as roughly an additional 4% increase.
- One-time market recalibration after several years of unusually stable rates in the individual market (2020–2025).
Group rates are rising, too—often faster
While a 15% individual market increase is significant, many fully insured group plans are seeing much sharper hikes: 30%, 40%, 50%, and in extreme cases, well over 100%. These swings can be unpredictable and financially destabilizing for employers.
ICHRA helps insulate employers from these swings by:
- Shifting risk: Large claims no longer hit the employer’s plan directly.
- Providing budget control: Employers set a defined monthly allowance, keeping cost forecasting consistent year over year.
Moving healthier risk into the individual market strengthens the pool
When employers adopt ICHRA—either as a full replacement for group coverage or through carve-outs built for large portions of their workforce—they move both healthy and high-utilization employees into the individual market together. This balanced shift helps stabilize the risk pool and can lead to more sustainable rates over time.
ICHRA rules also require that employee classes be defined in ways that ensure an equitable distribution of risk. These class structures prevent employers from isolating only higher-cost employees in the individual market, further supporting market stability.
The off-exchange plan advantage
Despite all the headlines about on-exchange rate filings, one critical (and often overlooked!) point is that ICHRA providers like Zorro primarily place employees on off-exchange plans.
Off-exchange coverage offers several advantages in the current environment:
- Less impact from policy changes: Because subsidies don’t apply, off-exchange plans aren’t directly affected by tax credit expirations or adjustments.
- Potentially smaller rate changes: Without subsidy-driven pricing shifts, off-exchange products may see less volatility than their on-exchange counterparts.
- Same ACA-compliance standards: Employees still get the essential benefits and protections required under the ACA.
For many employers and employees, this means the dramatic increases making news headlines may not reflect their actual experience.
A note on affordability rates
Under the ACA, employer-sponsored coverage is considered “affordable” if the employee’s share of the premium for the lowest-cost self-only plan doesn’t exceed a set percentage of their household income. In 2026, this threshold will rise from 9.02% to 9.96%.
While this means employees could be asked to contribute slightly more toward premiums, it also gives employers more flexibility to maintain predictable contributions—even in a year with above-average individual market increases. Employers can also redirect some savings into other benefits, such as HSAs or supplemental savings accounts, to help offset the impact on employees.
In conclusion
Concerns surrounding 2026’s ACA premium increases are valid. However, it’s crucial for benefits pros to remember: despite the double-digit rate hikes expected this year, the individual market remains more stable than the group plan market. Most experts expect the market to settle back into more typical single-digit annual increases after this one-time adjustment.
For employers, the big picture hasn’t changed: ICHRA remains a strategic way to control costs, limit risk, and give employees more choice in their coverage. And with both on- and off-exchange options available, there are flexible paths to navigate the year ahead.