What Is an ICHRA? The Complete Guide for Employers, Brokers, and HR Leaders
Hey there!
Healthcare costs are rising and traditional group health insurance isn’t keeping up. Employers, brokers, and HR teams are searching for new ways to offer competitive benefits without breaking budgets. That’s where ICHRA — Individual Coverage Health Reimbursement Arrangement — comes in. Think of it as the “401(k) of health benefits.”
What Is an ICHRA?
An ICHRA (Individual Coverage Health Reimbursement Arrangement) is a health benefit that allows employers to reimburse employees for individual health insurance premiums and qualified medical expenses on a tax-free basis. Instead of offering one group plan, employers set a budget, and employees choose the coverage that works best for them.
How ICHRA Works
Employer sets allowance – Define how much money to give employees each month.
Employees choose coverage – Employees shop for ACA-compliant health plans or Medicare.
Reimbursement – Employees pay premiums, then get reimbursed tax-free.
Administration – A third-party administrator like CafeHealth ensures compliance and reporting.
Why Employers and Brokers Are Switching to ICHRA
Cost Control: Predictable monthly reimbursements instead of rising group premiums.
Employee Choice: Workers pick plans that fit their families’ needs.
Compliance: Meets ACA employer mandate when designed correctly.
Flexibility: Works for full-time, part-time, seasonal, and different employee classes.
Recruitment & Retention: Attractive benefit for today’s workforce.
Who Can Benefit from ICHRA?
Employers: Especially those with 20–500 employees tired of rising renewal rates.
Brokers: New revenue stream by offering innovative solutions.
HR & Payroll Teams: Simplifies benefit management with easy integrations.
Employees: More choice, more savings, more control.
Key Compliance Notes
Must be offered fairly to defined employee classes.
Employees must prove they’re covered by individual health insurance.
Works with COBRA, FSAs, and HSAs if structured properly.
Conclusion
ICHRA is no longer just a trend — it’s a smarter, scalable benefits strategy. With adoption tripling since 2020, brokers, HR leaders, and employers can no longer ignore it.
👉 Want to explore if ICHRA is right for your company or clients? Book a 15-minute strategy call with CafeHealth today.
