For employers
ICHRA: a predictable alternative to a group plan
An Individual Coverage Health Reimbursement Arrangement lets an employer of any size reimburse employees tax-free for individual health insurance instead of buying a group plan. You set the budget; they choose the coverage. We work with employers in seven states.
On this page
How an ICHRA works
The mechanics are simpler than the acronym suggests. The employer commits to a monthly amount, the employee buys their own individual plan, and the employer reimburses them tax-free up to that amount.
You set the contribution
A fixed monthly allowance per employee, which you decide. It can vary by employee class and by age or family size within the rules, but it is your number rather than a carrier’s renewal letter.
Employees buy their own plan
Each employee picks an individual health plan on the marketplace that suits their own household, doctors and prescriptions. Nobody is forced into one compromise plan chosen for the whole company.
Reimbursement is tax-free both ways
Reimbursements are excluded from the employee’s taxable income and deductible to the employer, provided the arrangement is set up and documented correctly. That last part is not optional.
The coverage is portable
The policy belongs to the employee, not to you. When someone leaves, their coverage does not collapse on their family — which removes one of the harder conversations in a small company.
When it fits, and when it does not
ICHRA is genuinely better for some employers and clearly worse for others. Here is the honest version of both.
It tends to fit when
Your group renewal rises unpredictably each year, your team is spread across different areas or life stages, you are too small to get decent group rates, or you want to offer something without taking on a group plan’s administration.
It tends not to fit when
Your employees are largely in a household income range where a marketplace subsidy would have been worth more than your contribution, your existing group plan is genuinely well priced, or your team strongly values not having to choose a plan themselves.
The subsidy trade-off is the real catch
An employee offered an affordable ICHRA cannot also claim a premium tax credit for that coverage. If your contribution is smaller than the subsidy they would have received, they are worse off. This is the calculation that decides most ICHRA cases and it has to be run before you commit, not after.
It cannot be combined with a group plan for the same people
You may not offer the same class of employee both an ICHRA and a traditional group plan. You can run different arrangements for genuinely different classes, but the class rules are specific.
What setting one up involves
None of this is difficult, but it is all mandatory. An ICHRA that skips the paperwork is not an ICHRA.
Written plan documents
The arrangement has to exist on paper, with the classes, contribution amounts and terms set out. This is what makes the tax treatment stand up.
A notice to employees
Employees must be told in advance, with enough detail and enough lead time to make their own decision and to understand how it affects any subsidy they might otherwise claim.
Proof of coverage
Employees have to attest that they hold qualifying individual coverage, and re-attest each year. Reimbursing someone with no coverage in place breaks the arrangement.
A way to administer it
Somebody has to collect substantiation and process reimbursements each month. For a very small team a spreadsheet can work; beyond that an administration platform is usually worth its fee.
Working out whether it makes sense
Send us a rough census — ages, ZIP codes, family sizes, no names needed — and what you spend now or intend to spend. We will model it against what your employees would actually face on the marketplace, subsidies included, and tell you plainly whether it is worth doing.
What we will tell you
What a given contribution buys each employee in practice, who would be better off on a subsidy instead, and what the administration would realistically cost you each month.
What we will not do
Give you tax or legal advice. We are insurance brokers. The plan documents and the tax treatment should be reviewed by your CPA or benefits counsel, and we will happily work alongside them.
Common questions about ICHRA
Is there a minimum or maximum company size for an ICHRA?
No. An employer of any size can offer one, from a single employee upward. There is also no minimum or maximum contribution set by the rules — the amount is yours to decide, though it has to be offered consistently within each employee class.
Can employees still get a premium tax credit?
Not for coverage under an ICHRA that is considered affordable for them. They may opt out and claim a subsidy instead if the offer is unaffordable by the standard test. This trade-off is the single most important number in an ICHRA decision, and we run it before recommending anything.
Can I offer an ICHRA to some staff and a group plan to others?
Only along permitted class lines — for example full-time versus part-time, or salaried versus hourly, or employees in different rating areas. You cannot offer the same class a choice between the two. The class rules are specific enough that they are worth checking against your actual roster.
Who handles the reimbursements each month?
You do, or an administration platform does on your behalf. Employees submit proof of coverage and premium payment, and you reimburse up to their allowance. For small teams this is manageable in-house; past a handful of employees most businesses use a platform, and we can point you at options.
Do you give tax advice on this?
No — we are licensed insurance brokers, not tax advisors or attorneys. We will model the insurance economics and help your employees enroll. Plan documents, the tax treatment and any ERISA questions belong with your CPA or benefits counsel. Call 702-213-7375 and we will happily work alongside them.
Talk to a licensed broker
Call or send a message. We usually reply within one business day, and calling is faster when it's urgent.
Or email ollie@wellcoveredsolutions.com