Executive Summary: ICHRA, ACA Markets, and Level Funded: Three Models in Search of a Strategy
FWD.02 — The Changing Market#
Level funded, ICHRA, and ACA marketplace coverage are not interchangeable options on a spectrum from simple to complex. They are structurally different responses to different problems with different risk allocations, different information architectures, and different implications for the TPA’s role. Most bad product strategy decisions at TPAs come from treating them as the same thing at different price points.
Level funded places the employer inside the risk. The employer has real financial exposure, real claims data, and a real relationship with a TPA that manages claims, tracks stop loss accumulators, and reports on cost drivers. The TPA’s differentiation, claims intelligence, stop loss management, employer analytics, member navigation, lives entirely in this model. ICHRA places the employer at arm’s length: a monthly reimbursement amount, an employee who buys a marketplace plan, no claims exposure, no stop loss relationship, and no visibility into utilization. The TPA’s role in ICHRA is reimbursement processing and compliance verification. Necessary work, but fundamentally thinner. The ACA marketplace places the individual alone: community-rated premiums, no employer, no claims data visible to anyone in the employer relationship.
The expiration of enhanced premium tax credits on January 1, 2026 sharpened the structural differences materially. Enrollees with income above 400 percent of FPL (approximately $63,000 for an individual in 2025) lost all premium tax credit eligibility. A 60-year-old couple at 402 percent FPL can face $22,600 in annual premiums for a benchmark silver plan in 2026. The Urban Institute projected 4.8 million people becoming uninsured as a result of the expiration. Individual market premiums for 2026 increased an additional 18 percent on average as insurers priced in the expectation that healthier enrollees would drop coverage. ICHRA’s value proposition is entirely dependent on the quality and affordability of the marketplace it reimburses into, and that marketplace just became significantly more expensive for the population most relevant to TPA strategy.
ICHRA adoption grew over 1,000 percent from 2020 to 2025. Eighty-three percent of employers offering ICHRA for the first time had not previously offered any coverage. ICHRA is the right on-ramp for employers who have never offered benefits and for employees with income below subsidy thresholds in competitive individual markets. It is not a substitute for level funded for employers whose workforce earns above subsidy thresholds or whose market has thin carrier participation.
The structural insight: the TPA that adds ICHRA because the market is growing without a clear theory of which employers belong in which model is building a product portfolio that competes with itself and confuses its broker channel. The sharper position is that the TPA’s differentiation exists in level funded, not ICHRA, and adding ICHRA without honest criteria for model selection is a strategic retreat that is not always recognized as one.