Perspectives

The Coming ACA Shockwave

How Employers Can Future-Proof Their Benefits Before the 2026 Cliff

Introduction

The United States stands on the cusp of a seismic healthcare shift. With the enhanced Affordable Care Act (ACA) subsidies set to expire at the end of 2025, the very structure that has sustained the individual market may falter under its own weight. That potential implosion carries sweeping implications—not just for individuals currently relying on the exchanges, but for the entire ecosystem of employer-sponsored coverage, including the rapidly growing Individual Coverage HRA (ICHRA) market.

The Coming ACA Shockwave

According to KFF and recent analyses, premiums for ACA marketplace plans are projected to more than double in 2026 if Congress fails to renew the subsidies, rising from an average of $888 to $1,904 per year for subsidized enrollees—a 114% jump. This will push many individuals and families out of the market entirely, with younger, healthier participants most likely to opt out. The resulting adverse selection could trigger cascading cost increases and reduced access across the ACA exchange framework.​

This scenario threatens not merely affordability but stability: if millions drop coverage, risk pools deteriorate, insurer participation falters, and hospitals face rising uncompensated care burdens. The ACA marketplaces—already dependent on federal tax credits to prop up premiums—could unravel.

The ICHRA Crossroads

Individually Controlled HRAs, or ICHRAs, were designed to blend employer control with individual choice. They allow employers to allocate defined dollar amounts for employees to purchase individual-market insurance instead of sponsoring a traditional group plan. Since 2020, ICHRAs have steadily gained traction: adoption grew 34% from 2024 to 2025, particularly among mid-sized employers.

Yet this growth story presumes a functioning, reasonably priced individual market. If the ACA collapses under subsidy withdrawal, the ICHRA model’s foundation erodes. Without affordable individual plans, the concept of ‘defined contribution healthcare’ becomes untenable, forcing employers to rethink their playbooks.

Employer Implications and Strategic Choices

For employers contemplating ICHRA, the looming ACA disruption raises existential questions. The ICHRA model works where the individual market is vibrant, choice-rich, and subsidy-supported. Its strength lies in cost transfer and administrative simplicity—but in a destabilized marketplace, volatility replaces predictability.

Employers evaluating the ICHRA path should monitor local market dynamics closely. In markets where carrier exits or premium hikes are likely, alternative funding models merit renewed attention:

• Level-funding remains the preferred bridge between fully insured and self-funded models. It offers predictability, partial refund potential, and stop-loss protection while shielding smaller groups from full claims volatility.
• Medical stop-loss captives enable employers to pool risk and recapture underwriting profit. They combine scale with control, giving participants leverage over reinsurance pricing and shared risk management.
• PEO arrangements (Professional Employer Organizations) may serve as short-term stabilization tools, offering administrative relief and access to group-rated benefits until the broader policy environment stabilizes.
• Fully self-insured or captive-funded programs appeal to employers seeking autonomy and trend management—even if that means assuming greater immediate risk in exchange for long-term control.

Innovation and Trend Mitigation Through Episodic Strategies

Uncertain policy moments often breed innovation. Employers should look not only to how they fund care, but how care is consumed and paid for. Oxbridge Health’s Episode Benefit Plans, as an example, represent a paradigmatic shift in benefit design toward guaranteed-cost, bundled allowances per episode of care, rather than fragmented fee-for-service payments.

This structure reinvents predictability, cost control, and consumer engagement simultaneously—offering multiple financial and behavioral “levers” to align spending with outcomes. For employers migrating away from traditional PPO or ACA-linked structures, episode-based models bring built-in trend mitigation, improved provider alignment, and transparent cost forecasting.

Guidance for Employers

• Scenario-plan now for subsidy expiration. Model 2026 premium environments under multiple assumptions to anticipate the impact on ICHRAs and exchange-linked coverage affordability.
• Evaluate local networks and carrier commitments—ICHRA viability depends heavily on stable regional marketplaces.
• Diversify funding strategy by considering captives, level-funding, or partial self-insurance to regain control from carrier-driven inflation.
• Incorporate modern benefit architectures like episode-based designs to tame utilization-driven trend escalation while improving member experience.
• Use this moment as an inflection point—from reactive premium management to proactive benefit engineering.

In short, if the ACA subsidy framework collapses, the ICHRA model will likely contract temporarily, creating opportunity for innovative, employer-controlled alternatives to rise. Those who act now—exploring hybrid funding and episode-based benefit designs—will emerge not just insulated from shock, but operationally advantaged in a post-ACA landscape.