An Individual Coverage Health Reimbursement Arrangement (ICHRA) is a health benefit where employers reimburse employees for health insurance premiums and/or qualified medical expenses. Unlike traditional group health insurance, ICHRAs allow employees to choose their own individual health plans, supported by a fixed monthly reimbursement from their employer.

With an ICHRA, employers offer employees a fixed reimbursement each month to pay for their health insurance plans. Employees choose their own health insurance plans and use the funds to pay for their monthly premium costs or qualified medical costs. Employer contributions are tax-free.

An ICHRA comes with distinct benefits for employers and employees. It gives employees the freedom to choose their own health insurance, rather than being limited to employer-chosen options. It gives employers and business owners the flexibility to choose a fixed monthly contribution that works for their budget. An ICHRA can also reduce administrative burden, as employers and benefit managers do not have to manage individual employee plans.

The choice between an ICHRA and a traditional group health insurance option depends on business needs. ICHRAs can be more flexible, personalized, and cost-effective, allowing each employee to choose their own plans. ICHRAs also do not have a contribution minimum, meaning that employers are free to offer any reimbursement amount that works for their budget. Traditional group plans offer a more standardized approach and may provide discounts based on the volume of enrollees.

Unlike traditional group plans, ICHRAs have no minimum employer contribution. This means that employers can set a fixed monthly reimbursement amount that works for their budget and offer it to every employee. These contributions are tax-free.

Employees are not required to enroll in an ICHRA health insurance plan and can choose to opt out. However, the unused contribution amount will not be added to the employee’s paycheck.