For the past two decades, I've dedicated my career to the insurance industry, navigating its complexities from multiple vantage points. I'm Gary Daniels, Chief Growth Officer at Thatch, where I lead our growth strategy, focusing on carrier partnerships, organizational evolution, and Thatch's long-term strategic direction. Before Thatch, I spent 15 years at UnitedHealthcare, holding various regional and national roles, ultimately serving as CEO for the Pacific Northwest. In that role, I was responsible for all commercial products and distribution, holding full P&L accountability across a diverse and dynamic market.
Over the past few months, I've had the privilege of engaging with some of the brightest minds in healthcare: executives, policymakers, insurance commissioners, and consumer advocates. What's become abundantly clear is that the broader insurance community underestimates the seismic shift happening right now. Choice, powered by Individual Coverage Health Reimbursement Arrangements (ICHRAs), is transforming healthcare like never before. For the first time in our industry's history, we're seeing alignment behind a consumer-driven model that empowers individuals while unlocking new growth opportunities for carriers.
I'm not entirely sure how long it will take ICHRA to become mainstream. But as someone who helped build the current group model, and who knows firsthand the structural weaknesses and the discomfort of confronting them, I'm convinced that the only path to truly right-size our fractured healthcare system is to focus on individual consumer needs.
In the pages that follow, I'll outline why ICHRAs are poised to become the next generation of carrier earnings, how major players are already positioning themselves for 2027 and 2028, and why, at Thatch, we're laser-focused on partnering with carriers to build the infrastructure needed to make ICHRAs sustainable. We're committed to safeguarding risk pools through this transition, helping employers and employees navigate the shift with confidence, and ultimately empowering the consumer.
Moreover, policymakers from across the political spectrum have compelling reasons to embrace the consumer choice offered by ICHRAs. Insurance commissioners are exhausted by the challenges posed by self-funded and level-funded plans, where network oversight is often elusive, and consumer protections are frequently unclear.
The Last Great Insurance Market for Carriers
Over the last six years, individual health insurance has consistently outperformed fully insured group markets in terms of gross margins (source: KFF Health Insurer Financial Performance, 2024). Yet despite this margin strength, carriers aren't simply chasing more of the same in the individual market. Instead, they're strategically shifting focus toward level-funded and self-funded arrangements, and the reasons are compelling.
Every time a 150-life group exits the fully insured market into a captive, alternative third-party administrator (TPA) arrangement or jumbo administrative-services-only (ASO) contract, the carrier loses the chance to earn an underwriting margin. In these arrangements, revenue is limited to administrative fees, a far cry from the robust margins achievable in the individual market. But ICHRAs change the equation. With ICHRAs, those same groups can re-enter the market at an 80% Medical Loss Ratio (MLR), enabling carriers to capture significantly higher gross margins than in traditional ASO levels. Even if a carrier loses half its membership to competitors, the revenue per member in the ICHRA model dramatically outpaces what's possible through administrative fees alone.
By 2028, the landscape will shift even further. Carriers will be required to pass through pharmacy rebates that have historically offset ASO administrative charges. As those subsidies disappear, ASO fees could increase by up to 50%, driving employer groups toward models that offer predictability, consumer choice, and scalability. There's an ongoing debate about how much rebate practices will change or how PBMs and carriers will adapt, but one thing is clear: we've already seen significant increases in fees, a trend that is expected to continue through 2028.
Carriers are increasingly shifting their network and product strategies to double down on the individual market, recognizing it as the next major growth engine in healthcare. As ICHRA adoption accelerates, leading insurers are not just adjusting pricing; they're rethinking how their infrastructure supports a consumer-first experience. This includes redesigning networks to align with individual plan economics, building technology to support real-time enrollment and member navigation, and investing in member communications that guide individuals through plan selection, onboarding, and ongoing care decisions.
We're also seeing a wave of new partnerships, both tech-enabled and distribution-focused, specifically aimed at bridging the transition from group to individual coverage. These aren't just cosmetic changes; they represent a more profound strategic realignment that serves individuals as the primary unit of value rather than the employer group. For carriers that get it right, the individual market isn't a risk to manage. It's a growth opportunity to own.
Politics of Choice: Why Both Sides of the Aisle Win
Across the political spectrum, states are exploring policies that expand and improve value in the individual market. Red-leaning states are rallying behind ICHRAs because they offer employer cost control and long-term predictability that support business competitiveness and growth. For example, Indiana's 2024 tax credit allows small businesses (those with fewer than 50 employees) to claim up to $400 per employee in the first year they offer an ICHRA (dropping to $200 in year two). Georgia, Ohio, and Texas all considered rolling out similar credits of $400 to $600 per employee annually.
Blue states, on the other hand, emphasize consumer empowerment and protection. Washington, for instance, has implemented reimbursement caps in its state exchange product, Cascade Care, limiting hospital reimbursements to 160% of Medicare rates via SB 5526 and placing similar caps on public employee plans via SB 5083. For comparison, average commercial group rates exceed 225% of Medicare. These measures are designed to protect vulnerable populations and state budgets from runaway costs but also create enormous pricing pressure on those without such protections, namely, the commercial group market dominated by large ASO customers. Other states have implemented or are exploring similar caps to enhance patient safeguards and control costs. As more consumers recognize price inconsistencies among different market segments, it's reasonable to expect such protections to expand to the non-exchange individual market rather than contract, especially since reverting to higher market rates would create a severe budgetary strain for states.
Beyond these immediate policy incentives, every state is bracing for looming Medicaid funding cuts, which will create fiscal strain. Red states value employer predictability, blue states prioritize consumer protections, and all states stand to gain financially. That's why ICHRA stands out as a rare solution that addresses bipartisan interests.
Insurance Commissioners: Protecting Consumers in a Complex Market
Across the country, state insurance commissioners are intensifying scrutiny of level-funded and self-funded plans. Their concern isn't about stifling innovation; it's about protecting consumers from the unintended consequences of fragmented plan design and uneven regulatory safeguards.
At the heart of the issue is network adequacy, benefit structure and cost containment programs. Many of these plans stitch together multiple vendor networks, creating what's often referred to as "Frankenstein plans." These patchwork designs leave consumers bewildered, with inconsistent access to providers.
Reference-based pricing models, while promising cost savings, have also drawn attention. It often leads to surprise bills, leaving consumers exposed to unpredictable charges for essential services. Meanwhile, the patchwork of mandated benefits, varying from state to state, means that consumers moving between fully insured and self-funded plans may find critical services, such as mental health, maternity, or cancer screenings, suddenly missing. These gaps are felt most acutely when consumers need care the most.
Commissioners see these issues as a call to action. By steering groups toward regulated individual markets via ICHRAs, they can enforce consistent network adequacy, fair pricing, and comprehensive benefits. In a rapidly transforming healthcare system, stability, clarity, and consumer protection are non-negotiable. Commissioners recognize that it's time to reevaluate the roles of level-funded and self-funded plans and adopt solutions that prioritize consumers' interests first.
Don't Be Sidetracked by Short-Term Murkiness
In the face of strategic posturing by large carriers and consulting firms eager to reframe ICHRAs as a mere gimmick or risk-shifting tool, it's crucial to stay focused on the long game. ICHRAs are not a passing trend; they are the future and the last frontier of the health insurance market.
Yes, 2026 will be messy. Pending federal policy changes, including H.R. 1 or the "One Big Beautiful Bill Act," had the potential to supercharge the ICHRA economy with tax incentives and administrative reforms, but we're already seeing large carriers maneuvering to have their cake and eat it too. In 2026 filings, some have threatened to withdraw from individual markets if subsidies aren't extended. These same carriers also stand to lose on Medicaid and now seek to use the ACA market as leverage. Yet, carriers have proven that individual coverage can be both profitable and sustainable when appropriately structured.
Aetna's exit, on the other hand, is less a warning sign than a reflection of its struggles with the under-100 group and its lack of an individual strategy altogether. Early reviews of 2026 individual market plans are showing significant premium increases, much of which is being driven by one-time factors. This includes the expiration of enhanced premium tax credits, which alone accounts for 4 to 7% of the increase, as well as carrier-driven assumptions tied to experience restatements for 2026 membership, contributing an additional 2 to 5%. However, even then, a 40-year-old in lowest-cost silver plan remains 20% cheaper than comparable small group rates in the same rate band and metal tier in early filings for 2026 in specific markets. In New York, requested individual rate increases for 2026 are over 10% lower than those for small groups. Furthermore, we’ll see a significant number of new market entrants and expanded product offerings for the 2026 cycle. This underscores that even amid volatility, individual pools are still competitive.
The ICHRA incentives proposed in the House-passed budget and tax bill had the potential to supercharge adoption and address one of the most persistent concerns in the market: individual pool deterioration. By offering employers up to $1,200 per employee in tax credits for the first year they offer an ICHRA, and up to $600 per employee for the second year, the bill introduced powerful financial levers that could accelerate the shift from group to individual coverage. Just as important, these incentives are likely to attract a fresh wave of healthier, lower-risk individuals into the marketplace, helping to stabilize premiums and balance out the risk pool almost overnight. In the face of expiring individual premium tax credits, this next phase of ICHRA growth could strengthen the ACA market, creating a more sustainable and equitable system for employers, employees, and carriers alike.
Despite inclusion of ICHRA provisions in the House-passed version of H.R. 1, the Senate ultimately prioritized sweeping cuts to federal healthcare expenditures. The bill is expected to significantly curtail access to government subsidized coverage for millions of Americans. This impact further underscores the need for Congress to act now to pass legislation supporting ICHRAs as a lower cost solution for expanding access to affordable coverage.
Following adoption of the Big Beautiful Bill, Congress is considering proposals aimed at expanding access to employer-sponsored health coverage, including portable benefits for independent workers and the gig economy. These efforts seek to address a real and growing need for flexible benefit models that support a changing workforce.
However, while the goal is right, policies that support proliferation of Association Health Plans (AHPs) will ultimately fall short of delivering on that promise. By grouping small businesses and self-employed individuals under ERISA, AHPs risk bypassing important state regulations such as mandated benefits, network adequacy standards, and premium tax structures which protect both consumers and state markets. Additionally, pooling employers through AHPs, MEWAs, or traditional group structures has historically done little to control costs or expand consumer choice. These models can also create added administrative complexity that moves healthcare decisions further away from the individual.
There's a better path, one that builds on the public policy goals of expanding affordable employer health benefits while aligning with the proven strengths of the individual market framework. ICHRAs empower employers to fund portable, consumer-directed accounts regulated by the states where individuals live, preserving local oversight, ensuring fair taxation, and giving consumers true flexibility as they move through their careers and lives.
Done right, ICHRAs unlock the purchasing power of the American consumer (the most powerful market force we have) and offer the best chance at controlling employer healthcare costs while meeting the evolving needs of today's workforce.
Illusionment of Self-Funded and Level-Funded Plans
There's a growing façade surrounding self-funding that many employers don't fully understand, and, in many cases, their consultants aren't eager to clarify. The reality is that most individual market plans have better hospital reimbursement rates than those found in traditional commercial group coverage. While self-funded employers are sold a menu of cost-containment strategies (from captives and carveouts to onsite or near-site clinics) many of these models are structurally designed to shift revenue away from carriers and toward consultants, TPAs, and other intermediaries. I've seen nearly every flavor of these solutions over the years, and while some may deliver short-term wins, they rarely address the root cause of rising healthcare costs. If you think ICHRAs can't deliver the same level of sophistication as large self-funded accounts, with even better cost savings and transparency, you haven't seen the latest version of the Thatch quote experience. It's world-class, delivering savings for self-funded customers thanks to the fundamental advantages of individual products and greater ability to control employer healthcare expenditures well into the future. As carriers refine their network and product strategies for 2027 and 2028, this advantage will only grow.
Moreover, self-funded employers are growing increasingly frustrated with the ongoing debate over data ownership, specifically, whether it belongs to the carrier, the employer, or the TPA. This tug-of-war often delays decision-making and obscures true cost drivers. Meanwhile, consultants continue to push for deeper data access, layering on additional audits, point solutions, and cost-containment programs, each with its own fees and complexity. None of these efforts fundamentally address inflated reimbursement rates or network inefficiencies. Employers are justified in questioning why these "solutions" proliferate while costs continue to rise.
Adding to the pressure, a wave of recent ERISA lawsuits has highlighted the liability and regulatory exposure that comes with managing a self-funded plan. Employers are finding themselves pulled into costly legal battles over opaque pricing, fiduciary breaches, and administrative failures, all risks they never intended to assume when they moved away from fully insured coverage.
In contrast, the only proven way to truly reset a cost trend is by addressing reimbursement rates, a lesson well understood in states like Oregon and Washington, where state employee and individual market plans leverage narrow networks and pricing discipline to control costs. That's precisely what the individual market does best: it applies structural pressure through network mechanics, standard benefit design, and regulatory oversight to achieve the price transparency and accountability that self-funded models continue to chase but rarely capture.
In my experience, level-funded plans are often marketed as a smart alternative to fully insured coverage, promising upfront savings through the elimination of state premium taxes and benefit mandates. But in reality, the savings are often one-time and illusory. These products are strategically designed to extract the healthiest groups from the ACA risk pool, offering artificially low first-year rates that don't reflect long-term cost dynamics. In year two, most employers face standard medical trend increases or worse, with some plans seeing rate hikes of 40 to 50% as soon as claims spike or group health starts to deteriorate. Unlike fully insured small business plans, there are no caps on rate increases, and level-funded carriers have no obligation to renew at reasonable rates. Their business model depends on pushing unprofitable groups back into the fully insured market, making level-funded plans effectively an employer-only stopgap. The structure doesn't reward risk improvement, nor does it stabilize costs. It simply creates churn, fragments the market, and erodes the predictability that employers need. When evaluated across a multi-year horizon, level-funded arrangements are often more volatile and less sustainable than many realize.
Defined contribution through ICHRAs, paired with individual policies that carry lower effective costs, offers employers both immediate and sustainable financial advantages. In the short term, shifting to ICHRAs enables employers to avoid the volatility and hidden overhead of traditional group or level-funded plans, delivering instant savings through lower premiums, reduced administrative complexity, and tax advantages. However, the real power of ICHRA lies in its ability to control long-term costs. By decoupling benefits from group risk pooling and adopting a fixed, budgeted contribution model, employers can precisely manage their healthcare spend year over year. Unlike group plans, which are subject to unpredictable renewals and double-digit trend increases, ICHRA allows employers to contain costs without cutting benefits, empowering employees to choose from a wide range of plans that suit their unique needs. It's not just a tactical win; it's a strategic shift that transforms benefits from a liability into a predictable, scalable investment.
Consumers Aren't Averages
For decades, group-based insurance models have relied on averages, a convenient simplification that treats consumers as statistical abstractions. But averages are blunt instruments in a system that demands precision. Imagine designing a plan around the "average" adult: 170 pounds, mild hypertension. Yet inside that average might be a 250-pound diabetic and a 120-pound marathon runner, each with vastly different needs. Relying on averages has led to bloated systems that obscure real clinical diversity, fueling inefficiencies, inequities, and poor outcomes.
In stark contrast, today's state-based individual markets have evolved into robust, stable ecosystems. They're no longer fragile experiments; they're the foundation for a consumer-driven healthcare system that delivers affordable, regulated care. Insurance commissioners now have powerful tools to protect consumers within these markets: enforcing network adequacy, monitoring benefits, and ensuring fair pricing. Unlike the patchwork "Frankenstein plans" of self-funded markets, individual coverage offers clarity, consistency, and regulatory oversight.
Consumers have grown disoriented by plans that shift benefits yearly, cross state lines with varying mandates, and dodge essential protections. Individual coverage models, like ICHRAs, put the consumer at the center of every decision, powered by modern technology and data infrastructure, and they break free from the tyranny of averages. They enable plans to reflect real-world diversity and deliver coverage tailored to each person's health journey.
While some argue that limited networks plague individual coverage, the reality is often the opposite. When evaluating the total number of carriers and plans available in a given market (rather than a single carrier's offering) many individual markets provide broader access to providers and hundreds of plan options. Looking ahead to 2027 and 2028, we'll see a dramatic expansion of networks and product designs that empower consumers to choose care based on the price that systems charge at specific facilities. This competitive dynamic, driven by transparency and consumer choice, is exactly what the healthcare system has long needed.
The group model gave us the illusion of control. But that illusion has bred inequity, confusion, and skyrocketing costs. The future of healthcare is individual. It's time to embrace a system that treats people like people and delivers care as unique as the individuals who need it.
Thatch: Leading the Choice Movement
As the industry pivots from group-based coverage to consumer-driven models, Thatch is uniquely positioned to lead the transformation. Founded in 2021 with a vision to build a healthcare system people truly love, we have placed the consumer at the center of every decision, re-engineering the value chain across carriers, distribution, and policy. Central to that vision is our intentional focus on building a national infrastructure that recognizes ICHRA will live or die by the quality of each underlying transaction. How a consumer's application is submitted to an individual carrier, how eligibility files are exchanged, how premiums are billed and reconciled: every step must be precise, automated, and consumer-friendly. That transactional fluency is in our DNA.
More than 60 percent of our team is composed of engineers, R&D professionals, and data scientists, a deliberate choice that underscores our commitment to scalable technology over high-cost sales overhead. Coupled with deep expertise across fintech, HRIS, carrier operations, and high-growth SaaS, Thatch is the only company poised to capitalize on this seismic shift to individual-based healthcare. Today, more than 1,000 employers trust us to deliver ICHRA benefits. While our early momentum was in the small-group segment (1 to 50 employees), our fastest-growing cohort is now mid-market employers (51 to 1,000), validating both market appetite and platform scalability.
As the legacy group model (built on averages and outdated frameworks) continues to falter, Thatch is ready to provide personalized, equitable, and financially sustainable solutions. In a world where the future of healthcare is consumer-driven, we're not merely participating in the transformation. We're leading it.
