ICHRA stands for Individual Coverage Health Reimbursement Arrangement. Whoever named it was not in marketing. What it does is simple: your company sets a fixed monthly health budget, and each employee uses it to buy the plan that fits their own life.
A fixed dollar amount per employee, per month. You pick the number, and you can set different allowances for different classes of employees: full-time, part-time, seasonal, by state, and more.
Any ACA-compliant plan on the individual market where they live. Their doctor, their network, their call. Preexisting conditions covered, no underwriting games.
Up to the allowance, premiums first. Medical expenses too, if you allow it. The administration runs through platform partners; your HR person approves things instead of chasing paper.
No group plan exists, so there's nothing to reprice at renewal. The number changes when you change it.
The year ICHRA took effect. Three federal agencies wrote the rule on purpose (84 FR 28888, June 2019), and it sits on tax code from the 1950s: 26 CFR §1.105-2. This is federal law, not a loophole. Your carrier didn't send a memo.
ICHRA is the wrong move where the local individual market is thin or overpriced, for teams that love their current group plan and its doctors, and for workforces where most employees get large marketplace subsidies. That last one is the trap most ICHRA pitches skip: an affordable ICHRA offer replaces those subsidies, and the math can go against you. Whether it helps or hurts a given employee depends on their wage, their county, and your allowance. That's a math problem. We do the math where your people actually live before you commit to anything.
Yes. Reimbursements sit on the same tax foundation your group plan premiums do (26 CFR §1.105-2). Tax-free to the employee, deductible for the company.
No. ICHRA works from one employee to enterprise scale, and allowances can differ by employee class.
Not to the same class of employees. You can split classes: for example, a group plan for on-site staff and an ICHRA for remote staff.
An ICHRA offer that meets the federal affordability test makes them ineligible for marketplace premium tax credits. Depending on wages and allowance, that helps some people and hurts others, so we model it per employee before you offer anything.
The quiz reads your company and tells you whether ICHRA, a modern group plan, or staying put fits best. Reasons included.
Get your company's Benefits DNAThe content on this page reflects our opinions and analysis and does not constitute legal, tax, or insurance advice. ICHRA is authorized under 26 CFR §1.105-2 and Treasury/HHS final rules (84 FR 28888, June 2019, effective Jan. 1, 2020). Premium figures come from the 2024 KFF Employer Health Benefits Survey; any projection depends on your roster, allowance levels, and coverage choices. Where medical cost sharing programs come up in our recommendations: they are not insurance, are not regulated by state insurance departments, and do not guarantee payment. Talk to qualified counsel before changing your company's benefits.
