Benefitbay Raises $18M to Build the Plumbing for America’s ICHRA Shift

Ten Coves Capital backs a broker-first bet as employers flee $27,000 family premiums

Benefitbay closed an $18 million Series A on May 21, led by Ten Coves Capital. It’s a straight bet that the quietest revolution in U.S. health benefits is about to get loud.

The company runs Individual Coverage Health Reimbursement Arrangement administration for the nation’s largest brokerages. It now covers more than 40,000 lives. The money will go to three unglamorous things that actually matter: payments infrastructure, direct carrier and payroll integrations, and tools brokers can use without calling an engineer.

It’s a bet placed against a bleak backdrop. Employers paid an average $26,993 for family coverage in 2025, up six percent in one year, while workers kicked in $6,850. That’s why a model born in a 2019 federal rule is moving from experiment to standard practice.

The context no one can avoid

ICHRA exists because Washington changed the plumbing. On June 20, 2019, the IRS, Treasury, Labor and HHS issued final rules allowing HRAs to integrate with individual insurance, effective January 1, 2020. Suddenly any employer could give tax-free dollars for workers to buy their own plans instead of buying one group plan for everyone.

Premiums did the rest. Family premiums are up 26 percent over five years, outpacing wages and inflation. In that gap, ICHRA adoption has grown more than 1,000% since 2020. More than 260,000 U.S. employees were offered coverage for 2025, with over 13,000 businesses participating. The real market is likely 500,000 to one million lives already.

Large-employer adoption rose 34 percent year over year. Small-employer adoption rose 52 percent. This isn’t a niche anymore. It’s the defined-contribution replay of what happened to pensions forty years ago.

What Benefitbay actually raised money to do

Benefitbay isn’t selling insurance. It’s selling administration that makes ICHRA work at 1,000 lives and above.

The company announced the $18 million Series A to fund payments rails, carrier connections, and broker enablement. That’s deliberate. As big brokerages build dedicated ICHRA practices, they don’t need another portal. They need reconciliation that works when you have 1,200 employees on 1,200 different policies.

“We built benefitbay because we believe employees deserve more than a one-size-fits-no-one health plan,” said founder and CEO Brandy Thompson. “Brokers are how we make that vision real at scale.”

Ten Coves knows the movie. The firm backed HealthEquity from early growth through its 2014 IPO. Managing Partner Dan Kittredge calls ICHRA “the next chapter of that story,” adding that benefitbay “has built the infrastructure to lead it.”

The round also adds operational muscle. Kevin Mullins joins as president and CFO. He spent more than seven years as chief development officer at LifeStance Health, helping scale it from inception, and was most recently CFO at Zarminali Pediatrics.

Bailey & Company advised on the deal. Senior Director Rebecca Springer put it plainly: ICHRA has moved “from a niche benefits mechanism to an established cost containment strategy with growing traction among large employers.”

Why administration is now the product

An ICHRA is simple on paper. An employer sets a tax-free dollar amount by class and location. The employee buys an individual plan on the ACA marketplace. The employer reimburses.

In practice it’s hard. You have to verify enrollment, calculate affordability under IRS safe harbors using lowest-cost silver plans by geography, sync payroll, pay carriers directly, and reconcile across fifty states. If any piece breaks, the employee gets a bill.

That’s why the 2026 State of ICHRA Report matters. It found 56 percent of brokers now actively recommend or implement ICHRA — a first-time majority. Brokers who’ve moved at least one client jumped from 15 percent in 2024 to 37 percent in 2026. For three straight years, more than 91 percent of employers who adopted ICHRA said it was the right move. Brokers reported average client savings of about 15.5 percent after switching.

The HRA Council data backs it up. Among first-time adopters in 2025, 83 percent had not previously offered any coverage. Renewal rates top 90 percent. HRA Council members are seeing 400 to 800 percent increases in employer quote requests for 2026 and 2027.

Is this the 401(k) moment for health benefits? The parallel isn’t perfect, but it’s close. Employers want predictable costs. Employees want choice. ICHRA gives both by separating who pays from what plan you pick.

Yet the model only works if the plumbing holds. That’s the moat. Payments. Reconciliation. Compliance at scale.

What changes next

For employers, the math is shifting fast. With one in three firms absorbing double-digit premium hikes this year, defined contribution caps exposure. The SureCo report notes 94 percent of senior benefits leaders have explored alternatives; ICHRA proved among the most effective even as individual market rates spiked an average 15 percent after enhanced ACA subsidies expired.

For brokers, the Series A is a signal about where fees flow. Group commissions compress. ICHRA creates recurring admin revenue, technology fees, and advisory work around class design. Benefitbay’s build-out of direct carrier connections aims to make brokers the system of record.

For carriers and payroll vendors, integration is now table stakes. Without real-time eligibility and payment rails, ICHRA creates a terrible member experience. Expect more partnerships like Oscar Health’s sponsorship of the SureCo research, as individual-market carriers chase employer-funded lives.

For policymakers, the stakes are bigger. ICHRA currently rests on 2019 regulations. If adoption keeps compounding, Congress will face pressure to codify the rules. Permanence would reduce uncertainty and likely accelerate uptake — something KFF analysts have flagged as a key unlock.

For employees, the trade is clear: more choice, more responsibility. Younger workers, who make up the largest share of ICHRA enrollment, often find lower net premiums. Older workers in high-cost regions need richer contributions to stay whole.

The case against

Not everyone is sold.

Critics say ICHRA fragments risk pools, pulling healthier workers into the individual market and leaving traditional group plans with sicker, costlier populations. That could raise premiums for firms that stay fully insured, especially small businesses in states with thin carrier competition.

Then there’s the complexity problem. KFF’s Matthew McGough told AJMC that “most employees are not well prepared to shop for their own coverage,” noting workers can face 20 or 30 plans with different networks and drug formularies. Without personalized decision support, the burden lands on workers, and employers often have to spend more time on open enrollment just to explain the basics.

There’s also the subsidy cliff. A worker offered an affordable ICHRA loses eligibility for premium tax credits. If the employer contribution is miscalibrated, the employee can end up worse off — a real risk after the expiration of enhanced ACA subsidies.

Labor groups worry about erosion of comprehensive benefits too. ICHRA forces a binary choice per class: you can offer a group plan or an ICHRA, not both. That can feel like a takeaway, even if costs fall.

Benefitbay’s answer is execution. Better education. Better tools. Better payments. The data suggests when employers invest in support, satisfaction rises. Still, the model’s success will be measured less in capital raises and more in whether a worker in Kansas City can pick a plan on a Tuesday night without calling HR.

Why this round matters

The $18 million doesn’t change U.S. healthcare costs. It does accelerate the infrastructure that makes a different funding model viable at scale.

Ten Coves is betting that consumer-directed healthcare, which it helped build in HSAs, now migrates to insurance itself. Benefitbay is betting brokers, not employers or carriers, will be the distribution backbone. Both bets rest on the same premise: defined contribution will win not because it’s perfect, but because defined benefit has become unaffordable.

What follows will be measured in experience, not press releases. If 40,000 lives becomes 400,000, the question won’t be whether ICHRA works in theory. It will be whether the payments clear, the compliance holds, and the employee gets the right plan without friction.

That’s the bar this money has to clear.