VC investors flock to ICHRA in search of new insurance model

Venture capital is flooding money into ICHRA health plan administrators, as rising costs bring the employer health care market to an inflection point, per a new report from Bailey & Co.

The big picture: Regulatory changes and varying approaches by insurance carriers are two factors that will determine how deeply ICHRA will penetrate small and large employer markets.

Catch up quick: ICHRA — or Individual Coverage Health Reimbursement Arrangement — was created by President Trump's administration in 2020 as a flexible alternative to traditional group health insurance.

• It offers choices around contribution levels to employers and lets them offer employees a fixed, pre-tax dollar amount to spend on premiums.

Zoom out: The ICHRA market is growing 60% year over year, as workplace health insurance premiums continue to balloon.

Zoom in: Jack Hooper, CEO of ICHRA provider Take Command, tells Axios his company is "evaluating the market and considering coming back to raise this year."

• The company, which is "right on the edge of profitability," raised a $25 million Series B led by Edison Partners in 2023.

What's next: Bailey's report predicts several key ICHRA players will come to market this year.

Follow the money: A few providers will be cash-flow-even or profitable, with revenue in the tens of millions at the start of 2026, the report says.

• Per Bailey, Allos Ventures-backed Benefitbay had $7.4 million in run rate revenue as of January. Remodel Health, backed by Oak HC/FT and Hercules Capital, is generating $36 million in revenue.

What they're saying: "Although some observers have written ICHRA off as a VC-fueled bubble, we think ignoring this nascent market would be unwise," Bailey's James Metcalf and Rebecca Springer write.

• Primary drivers include "a clear ancillary effect, as people see the movement from group plans to ICHRA as very similar to the movement from pension plans to 401(k) and retirement," Hooper says.
• "For the CFOs of small and mid-size employers, it provides needed predictability, in terms of managing year-over-year health care premiums costs for employees," says Andrew Adams, managing partner at Oak HC/FT.

By the numbers: Industry experts estimate the current number of employees enrolled in ICHRA at between 500,000 and 1 million — equating to around $120 million to $240 million in annual revenue for these businesses at current pricing, per the report.

• The HRA Council, a health care advocacy organization, reports the number of employers offering an ICHRA grew 29% between 2023 and 2024.

State of play: Over the last few years, a spate of ICHRA startups have emerged and secured funding.

• Remodel Health raised more than $100 million in new funding in December 2024.
• Thatch raised a $38 million Series A in September 2024.
• Venteur Health Insurance raised a $7.6 million seed in Aug. 2023.
• StretchDollar raised $1.6 million in pre-seed funding in Sept. 2023.

Reality check: "If the United States was a country that was overall a healthy country that saw sustained experience of low incidences of chronic disease, extended mortality, and more emphasis on healthy lifestyles, then programs such as ICHRAs may be beneficial and appropriate for small and large employers," says Aarti Karamchandani, chief growth officer at MacroHealth.

• "The short-term financial benefits may not offset long-term potential damage incurred if an employee isn't getting an appropriate level of care because they didn't know which plan to select."