ICHRA, Education, and Why More School Leaders Are Paying Attention Now

For most education leaders, employer-sponsored healthcare has long been treated as a fixed part of doing business. 

You select a carrier. 
You negotiate a renewal. 
You absorb the increase. 
You explain it to employees. 
You repeat the process the following year. 

For a long time, that approach mostly worked. 

Today, especially in private, charter, and early childhood education, the cracks are becoming harder to ignore. 

Healthcare costs are rising faster than revenue. 
Renewals feel unpredictable. 
Administrative and compliance burdens keep growing. 

As a result, more education leaders are starting to ask a fundamental question: 

Does the traditional group health plan still make sense for our organization? 

That question is what brings ICHRA into the conversation. 

What Is ICHRA and Why Is It Different? 

An Individual Coverage Health Reimbursement Arrangement, or ICHRA, allows employers to move away from sponsoring a group health insurance policy. 

Instead, the employer defines a fixed healthcare contribution. Employees then use that contribution to purchase their own ACA-compliant individual health plan. 

The employer still supports healthcare. 
The benefit remains tax-advantaged. 
Compliance requirements still apply. 

What changes is the structure. 

Rather than absorbing annual premium volatility, the organization commits to a predictable contribution amount. In that sense, ICHRA closely resembles the shift many organizations made years ago from pensions to 401(k) plans. 

For a general overview of how ICHRA works, DSP has covered the fundamentals in this article: 
https://blog.dspins.com/flexible-healthcare-funding 

Why ICHRA Is Being Considered Now 

The timing is not accidental. 

Healthcare inflation has outpaced wage growth for years. Large network access continues to exacerbate costs. Plan designs are becoming more complex while offering fewer guarantees. 

At the same time, education organizations are under increasing financial pressure. Tuition sensitivity, enrollment variability, staffing shortages, and limited pricing power all compound the challenge. 

Healthcare costs do not exist in a vacuum. They compete directly with staffing, programs, facilities, and student services. 

When healthcare becomes one of the largest and least predictable expenses in the budget, leaders begin looking for structural alternatives instead of incremental adjustments. 

ICHRA is one of the few options that actually changes the underlying mechanics of healthcare funding rather than rearranging plan designs year after year. 

Why Private and Charter Education Are a Natural Fit 

Private schools, charter networks, and early childhood education organizations often share several operational realities: 

• Tight margins 

• Limited ability to pass through cost increases 

• Multi-site or multi-state operations 

• Diverse employee populations across age, income, and family status 

Traditional group health plans struggle to accommodate that variability. 

One carrier, one network, and one renewal strategy rarely align well across different geographies and workforces. 

ICHRA adapts more naturally to this environment. 

Employees shop for coverage in their local markets. Plan options reflect regional healthcare realities. Employer contributions remain consistent even as enrollment and staffing levels change. 

For education organizations operating across multiple states or markets, this flexibility is often the primary appeal. 

DSP has laid out how these dynamics are affecting schools more explicitly here: 
https://info.dspins.com/healthcare-is-breaking-schools 

A Useful Comparison: Contractors and Variable Workforces 

Many of the same forces driving ICHRA adoption in education are present in construction and contracting. 

Both sectors deal with variable headcount, multi-state workforces, and limited ability to absorb unpredictable cost increases. 

In both cases, healthcare volatility introduces financial risk that leadership teams struggle to control. 

That parallel helps explain why ICHRA has gained traction in both environments. It is not because the model is trendy. It is because it aligns better with organizations that already operate under constant variability. 

The Challenges and Downsides Should Not Be Ignored 

ICHRA is not a universal solution. In fact, many implementations fail when the challenges are underestimated. 

Employee Experience Requires Support 

• Choice sounds empowering until employees are left to navigate it without guidance. 
• Without strong communication and decision support, ICHRA can feel like cost shifting rather than flexibility. This is especially true in education, where trust and culture matter. 

Market Differences Matter 

• Individual plan availability varies widely by geography. 
• Some regions offer competitive networks and pricing. Others do not. Ignoring these differences leads to frustration and poor adoption. 

Medicare Requires Careful Planning 

• Many education organizations have long-tenured employees who are Medicare eligible or approaching eligibility. 
• ICHRA can work well alongside Medicare, but only when contributions, coordination, and communication are handled intentionally. 
• This is not an area where shortcuts work. 

Communication Is Often the Biggest Risk 

• The most common failures are not financial. They are narrative failures. 
• If leadership cannot clearly explain why the change is happening, what employees gain, and where support lives, even a well-designed ICHRA will struggle. 

Fit Matters More Than Savings 

• One of the biggest misconceptions is that ICHRA is primarily a cost-cutting strategy. 
• Sometimes costs go down. Sometimes they do not. 

The more important outcome is predictability. 

Defined contributions. 
Fewer surprises. 
Clearer long-term planning. 

For some education organizations, that tradeoff makes sense. For others, it doesn’t. A clear decision either way is better than forcing a model that does not fit. 

What Education Leaders Should Take Away 

ICHRA is not a mandate. It is an option. 

It is a structural alternative that deserves serious evaluation, particularly for private, charter, and early childhood education organizations facing increasing healthcare volatility. 

But it requires honest assessment, thoughtful design, and disciplined communication. 

Done well, it can bring stability to an unstable system. 
Done poorly, it creates confusion and erodes trust. 

The difference is not the model. 
It is the preparation.

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Are you an educational institution seeking further evaluation of the ICHRA model?

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