Congress Can Help Small Businesses Afford Health Insurance
Health insurance is more expensive than ever. The average family plan last year cost employers and employees over $19,000 and nearly $6,300 per year, respectively. That’s enough to buy a new car.
Congressional Republicans’ budget reconciliation bill could help bring down those costs. Among other things, the One Big Beautiful Bill Act now under consideration in the Senate would expand access to “Individual Coverage Health Reimbursement Arrangements,” or ICHRAs, which allow companies to offer workers tax-free money to buy their own insurance on the individual market
That’s a good thing. By giving people more control over their healthcare dollars, ICHRAs could boost competition in the insurance market, force health plans to improve the quality of their products, and put downward pressure on prices.
Even for the biggest employers, health insurance can be a significant cost burden. The CEO of Starbucks once famously said that his company spent more on health care than on coffee.
For small businesses, the cost of health insurance can be downright prohibitive. In 2024, just 56% of businesses with fewer than 50 employees offered health insurance, compared with 89% of firms with 100 or more employees.
ICHRAs can change the calculus by allowing employers to decide how much they can afford to spend on health insurance — and then deputizing their employees to spend those dollars on plans that work for them.
As a result, ICHRAs can make it more feasible for more employers to offer some form of health benefits, even to part-time and seasonal workers. That could lead to a significant expansion of coverage, given that just 26% of part-timers in 2024 had an insurance option from their company, compared with 89% of full-time workers.
ICHRAs also free employers from the chore of administering a health plan — and permit them to direct more of their time and energy toward their core purpose.
Individual employees benefit from greater choice when they leverage the power of an ICHRA. According to research from the Manhattan Institute’s Chris Pope, the average individual-market consumer in 2023 had 88 plans from five insurers to choose from. Most employers, by contrast, offer just a few health plan options — and some only one.
All that shopping around can lead to lower prices. When people are paying for their own health insurance — just as their own home or car insurance — they become more sensitive to cost. Insurers thus have a strong incentive to offer better deals. One study found that giving employees more insurance options can deliver benefits equal to 13% of premiums.
ICHRAs also allow people to keep their health plan when they switch jobs. In 2021, a Gallup survey found that one in six adult workers with employer-sponsored insurance was “staying in jobs they might otherwise leave out of fear of losing their health benefits” — otherwise known as “job lock.”
Despite all these benefits, only an estimated 3 million people have ICHRAs — largely thanks to federal restrictions on how companies can offer them.
Now, Republicans in Congress are working to make them more accessible. The reconciliation bill passed by the House May 22 would enshrine in law much of a 2019 federal rule that created ICHRAs and rebrand them as “Custom Health Option and Individual Care Expense,” or CHOICE arrangements.
In addition, the bill would make more people eligible to use ICHRAs. And it would offer small businesses a $100 monthly credit per employee for offering the arrangements the first year, and $50 per month for the second.
The Senate can improve upon the House’s legislative work by allowing businesses to give individual employees a choice between an ICHRA or group coverage. Currently, businesses can only offer one option.
President Trump created ICHRAs six years ago. So it’s fitting that he may have the chance to bring these lower-cost insurance options to even more people this summer. Let’s hope Congress gives him the chance.
Sally C. Pipes is president, CEO, and Thomas W. Smith Fellow in Health Care Policy at the Pacific Research Institute. Her latest book is “The World’s Medicine Chest: How America Achieved Pharmaceutical Supremacy — and How to Keep It” (Encounter 2025). Follow her on X @sallypipes.
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