The Trump Health Policy Both Parties Are Bullish On

More states are encouraging businesses to help employees sign up for Obamacare.

They’re using a policy backed by President Donald Trump — the same Donald Trump who spent much of the fall deriding Obamacare as the “Unaffordable Care Act” — to do it.

Trump issued those broadsides to explain why he didn’t support an extension of government subsidies that made Obamacare plans more affordable for millions. Those subsidies have now expired, sending premiums soaring. But Trump has continued to support a 2019 rule issued in his first term that allowed states to offer tax credits to businesses that help employees enroll in Obamacare plans.

That offer is now finding more takers, among Republicans and Democrats, as state lawmakers look for ways to keep the uninsured rate down. Obamacare enrollment has already dropped by more than 1 million this year, with further decline expected. At least six states, including Ohio and Connecticut, are looking at offering the tax credits to businesses that adopt the Trump policy, known as Individual Coverage Health Reimbursement Arrangements, to stem the damage. ICHRAs allow employers to give workers a tax-exempt subsidy to purchase Affordable Care Act coverage, as opposed to offering a traditional group plan.

“If the Trump administration likes it, that means it's likely to survive a little bit longer,” Democratic Connecticut Gov. Ned Lamont said in an interview with POLITICO.

Connecticut is one of several states where lawmakers are introducing and passing bills to incentivize small businesses to adopt the Trump policy. Employers who offer to help their workers with Obamacare premiums can write off the amount they contribute on their taxes.

Employers’ shift toward ICHRAs, encouraged by insurers and state governments, doesn’t come without drawbacks. The amount of money workers receive is up to their employer's discretion and may not cover the cost of a plan. Depending on their income, employees might be better off using a government subsidy to purchase an Obamacare plan on their own or enrolling in a traditional group plan, if their employer offers it, health policy experts said.

But the concept of tax-exempt subsidies has bipartisan support, a rarity in the health policy world, giving proponents hope that it’s a long-term solution to make health care more affordable.

Lamont, in his 2026-27 budget request, is proposing a tax credit incentive for small employers adopting the arrangements. For him, the benefit of expanding their use is two-fold: It would help the small business community deal with soaring health costs, and it would help keep people off of Medicaid, the insurance program for low-income people. That would lower costs for the state, which shares the Medicaid bill with the federal government. Both outcomes would be a win for Democrats and Republicans, he said.

GOP proponents of the bill concur.

“I'm a very strong supporter of getting folks off of Medicaid, into the workforce, into private payer insurance, and that's really the goal behind this,” said Ohio state Rep. Meredith Craig, a Republican who is the lead sponsor of legislation in the state to create tax credit incentives for small businesses offering ICHRAs. The bill has passed the state House and is awaiting Senate action.

Indiana was the first state to adopt a law offering the tax credits in 2023. The policy has quickly become a model other states are looking to — especially after Congress let the Obamacare subsidies expire at the end of 2025.

Obamacare insurers, like Oscar Health and Centene, are bullish on the policy and are creating plans marketed specifically toward people with access to the tax credits.

“There’s not much middle ground left in Washington," Lamont said. "This is a piece that has some bipartisan buy-in."

ICHRAs’ rise

Though ICHRAs were established in 2019 through a Trump final rule, few employers initially utilized the arrangements. But ICHRAs have gained popularity since around 2023, as companies have sought innovative ways to deal with rising health cost pressures. The growth has been bolstered by increasing state- and federal-level interest in expanding the arrangements.

“Everything about ICHRA is growing,” said Robin Paoli, executive director of the HRA Council, a group that lobbies in favor of the arrangements.

Paoli has for years pushed lawmakers in Congress to codify Trump’s ICHRA rule — coming close to victory last summer when Republicans attempted to tack on the codification to the GOP’s sweeping tax law. Lawmakers ultimately scrapped the provision from the final version of the One Big Beautiful Bill Act, but given renewed interest in addressing health care affordability, a top issue for voters in the leadup to the midterm elections, “the time is perfect for Congress to work together” on making the policy permanent, Paoli said.

“There's momentum in the states, there's momentum in the administration, there's growing momentum in Congress, and we're seeing more and more different kinds of employee groups and employers get excited about ICHRA,” Paoli said.

On the insurer front, Oscar Health is among the companies leading the charge to expand ICHRAs.

Oscar Health has been lobbying state governments to take up bills similar to Indiana’s, which would provide small businesses a tax credit incentive to adopt ICHRAs. The major Obamacare insurer sees the arrangements as a way to keep people insured in the absence of enhanced ACA subsidies.

"With the expiration of enhanced subsidies, folks are looking for affordable alternatives, if their premium is higher than expected,” said Cathy Grason, head of government affairs at Oscar Health. “We're very optimistic that employers can leverage ICHRA to be part of that solution for folks."

Grason says the concept resonates with state- and federal-level Republicans and Democrats who want to make health care more affordable. For Democrats, ICHRA offers an avenue to strengthen the ACA marketplace. For Republicans, who favor health care choice, ICHRAs can be framed as a way to put money in the hands of consumers as opposed to insurers — a concept Trump recently endorsed.

Six states are considering a version of an ICHRA tax credit bill: Arizona, Georgia, Mississippi, Ohio, Connecticut and New Hampshire.

The National Conference of Insurance Legislators, an organization of state legislators serving on insurance committees, is working to approve a model tax credit law based off of Ohio’s bill that other states can emulate. The model bill could be put up for a vote as early as April, said NCOIL CEO William Melofchik.

State interest in the model is “pretty strong,” Melofchik said, and it’s coming from “a rare red and blue state mix,” including Florida, New Jersey and Texas.

“Everyone, whether Republican or Democrat, is just looking for solutions to get as many folks covered as possible."

Not so fast …

Despite growing bipartisan interest, even the strongest ICHRA proponents concede that the arrangements are not a cure-all for the health care affordability crisis, and the policy comes with limitations.

“We are bullish on ICHRA as a solution,” said Alan Silver, president of Centene’s Ambetter Health Solutions business, which focuses on ICHRA. “At the same time, we are more bullish on it being an alternative to traditional group-sponsored coverage.”

Employer-sponsored health insurance is the most popular form of coverage in the U.S., enrolling about 160 million Americans. Though rising premiums have been plaguing employers and consumers, a wholesale shift to ICHRAs is unlikely.

The arrangements can save money and administrative burden for employers while lowering their financial risk, but workers might not be better off under an ICHRA.

If a worker is offered the tax credit from their employee, the worker is typically disqualified from receiving Obamacare subsidies. An Obamacare subsidy, depending on the worker’s income level, could potentially be more generous than the ICHRA the employer offers. Employers can’t tailor ICHRA amounts to workers based on individual income or subsidy eligibility and instead must uniformly offer ICHRAs based on classes like family size or age.

Traditional group plans are also more likely to offer out-of-network coverage, while individual market insurers in some states have a limited number of plans providing out-of-network coverage, said Louise Norris, a health policy analyst for healthinsurance.org, an independent health insurance guide for consumers.

For small business owners who didn't previously offer health coverage, ICHRAs can often be an upgrade for their workers. But whether the policy is an adequate cost solution for a given company and its employees should be evaluated on a case-by-case basis, she added.

Either way, Norris said ICHRAs don’t address underlying causes of rising medical costs or the sky-high premiums consumers in both markets are experiencing, limiting their potential to be a long-term cost solution.

“You can't solve that problem by shifting people from the group market to the individual market or vice versa, because those underlying costs are driving up across the board,” she said.