By Mark Smith
Just six months ago, when I stepped into my role as CEO for a health benefits payments company, my team and I had one thing on our minds: a shared mission to put control back into the hands of the consumer. We are living in a time when employer-funded health benefits are becoming too difficult for both employers and employees to absorb, and it’s become clear that the old way of doing things is no longer sustainable.
In its latest National Survey of Employer-Sponsored Health Plans, Mercer found that the average cost of employer-sponsored health insurance reached $17,496 per employee, reflecting a 6.0% increase well above the rate of inflation and wage growth. If that number gives you pause, consider that this spend is only expected to increase throughout this year, with a total projection of nearly 7% (6.7%).
These numbers track with KFF findings, which show the average annual premiums for family coverage reached just under $27,000 in 2025, with workers contributing $6,850 on average. These skyrocketing increases are not just a finance issue; they create employee stress, affect overall well-being, and can erode employee trust and reduce productivity, engagement, and retention within organizations.
As health benefits costs continue to climb, employers face a difficult question: How do we preserve meaningful coverage without putting the burden on employees?
What employers can do
Citing a recent study from Mercer, SHRM notes that nearly half of CFOs (45%) said they intend to place a stronger emphasis on plan design changes in the coming years, including measures such as raising deductibles. The writeup states, “Mercer analysts said that despite ongoing concerns about health care affordability, many finance leaders see shifting some additional costs to workers as “unavoidable” in the current environment.”
As a business leader who must keep cost-control top of mind in every company decision, I understand this logic, but I believe there is a better solution that benefits both employers and employees.
For many employers, the more strategic path is to avoid blunt cost-shifting that saves money short term but damages employee well-being long term. Individual Coverage Health Reimbursement Arrangements (ICHRAs) provide a practical solution because they give employers more control over health benefits spending while giving employees more choice in coverage.
Instead of managing the rising costs and complexity of a traditional group health plan, employers can set a defined monthly contribution and allow eligible employees to use those funds toward individual health insurance that fits their needs. This can help reduce budget volatility, support different workforce segments, and create a more personalized benefits experience. With this model, employees can select from coverage options that they actually want, not just those that meet basic and urgent needs. Alternatively, if they want only the latter, that’s an option, too. The point is they get the freedom and control to choose what works best for them and their families.
While ICHRAs are not the right fit for every organization, they can be especially valuable for companies facing steep renewal increases, distributed workforces, participation challenges, or employees with diverse coverage needs. Done well, an ICHRA can help preserve employer-funded health benefits without forcing a one-size-fits-all plan or shifting unmanaged cost increases directly onto employees.
Employers must improve benefits communication
Many employees do not understand deductibles, networks, ICHRAs, prior authorization, or where to go for care. Poor understanding leads to poor decisions and higher costs. When we work with our employees at Nexben, we simplify open enrollment materials, offer decision-support tools, and communicate benefits year-round instead of once per year. It’s worked exceptionally well in arming each of our team members with the information they need to take control of their health benefits.
Takeaway
In a recent meeting with my team, we sat down with a large carrier who expected that the traditional group health insurance construct is now primed for disruption. After discussing ICHRA strategies at length, they wrapped up our meeting with a telling note, saying, “Change is coming soon.” I couldn’t agree more. Rising health benefits costs are not just a renewal problem. They are a workforce resilience problem, and both employers and employees are ready for real change. Employers that respond with usable solutions and health benefits strategies that support healthier, more financially secure, and more productive employees will continue to thrive.