Why ICHRA Fails in 70% of Companies
Why ICHRA Fails in 70% of Companies
Why ICHRA Fails in 70% of Employers (And It’s Not the IRS)
Table of Contents
Definition
Analogy Quote
Video
Historical Story
Bridge Paragraph
Modern Explanation
The Operational Integrity Framework
Contrarian Insight
Action Steps
FAQs
Call to Action
Sources
Definition
An Individual Coverage Health Reimbursement Arrangement (ICHRA) allows employers to reimburse employees tax-free for individual health insurance and qualified medical expenses. The employer controls the budget, while employees choose their own plans. When administered correctly, ICHRA is one of the most flexible and scalable health benefit models in the U.S.
Analogy Quote
A powerful design fails when the system behind it breaks.
Historical Story
In the early days of commercial aviation, planes were already capable of flying safely across continents. The technology existed. The engines were powerful. The designs were sound.
Yet accidents kept happening.
Investigations didn’t point to physics or aerodynamics. They pointed to process failures—missed checklists, poor communication, manual errors, and fragmented accountability. Pilots knew how to fly. Aircraft manufacturers knew how to build. What failed was the system that connected human action to technical precision.
The solution wasn’t new laws of flight. It was operational discipline: standardized checklists, automation, redundancy, and real-time monitoring. Aviation became safer not because planes changed—but because administration matured.
ICHRA is at the same crossroads today.
Bridge Paragraph
Like early aviation, ICHRA is not failing because the model is flawed or because regulators made it impossible. It fails when employers underestimate the operational rigor required to run it. The IRS didn’t break ICHRA—administrative shortcuts did.
Modern Explanation
ICHRA compliance requires precise coordination across eligibility rules, employee classes, affordability calculations, notice delivery, reimbursement substantiation, and payroll integration. Most employers treat ICHRA as a policy decision rather than an operational system.
Common breakdowns include late or incorrect notices, misclassified employee classes, manual reimbursement errors, and disconnected vendors handling enrollment, payroll, and compliance separately. These gaps create employee confusion, audit exposure, and financial leakage.
By contrast, well-administered ICHRAs rely on centralized platforms, automated compliance logic, and employee-friendly communication. When operations are aligned, employers gain cost control, employees gain choice, and brokers gain confidence.
The difference is not intent. It’s infrastructure.
The Operational Integrity Framework
The Operational Integrity Framework connects historical aviation discipline to modern ICHRA success:
Design with Precision
Define employee classes, contribution strategies, and affordability rules correctly from day one.Standardize Every Step
Automate notices, eligibility tracking, and reimbursement workflows to eliminate variance.Validate in Real Time
Use AI-driven checks to confirm substantiation, compliance, and documentation accuracy.Centralize Accountability
One system. One source of truth. One partner responsible for outcomes.Communicate Like a Control Tower
Clear, timely employee guidance prevents confusion before it becomes risk.
Contrarian Insight
Most employers believe ICHRA failures are caused by confusing IRS rules, but the truth is most failures come from poor administration and fragmented systems.
The cost of inaction is silent erosion—employee distrust, compliance exposure, and wasted dollars. The upside of modernization is control, clarity, and confidence at scale.
Action Steps
Audit your current ICHRA workflows for manual steps and vendor gaps.
Verify that employee class rules and affordability calculations are automated.
Centralize notices, substantiation, and reimbursements in one platform.
Train HR and brokers on employee-facing ICHRA education.
Partner with a TPA like CaféHealth that delivers AI-powered accuracy, faster processing, and human-centered support.
📥 Lead Magnet: Download the checklist — “10 Silent Errors That Destroy an ICHRA” — to identify operational risks hiding in plain sight.
FAQs
Why does ICHRA fail in the 70% of companies (and it’s not because of the IRS)?
Because most failures stem from poor administration, manual processes, and disconnected vendors—not regulatory design.
Is ICHRA inherently risky?
No. When administered correctly, ICHRA is compliant, flexible, and cost-controlled.
What is the biggest operational mistake employers make with ICHRA?
Relying on spreadsheets or multiple vendors instead of an integrated platform.
Can small employers run ICHRA successfully?
Yes—automation and expert administration level the playing field.
How does automation reduce ICHRA risk?
It standardizes compliance, eliminates human error, and ensures documentation accuracy.
Do brokers play a role in ICHRA success?
Absolutely. Brokers guide strategy, while TPAs execute operations.
Call to Action
Call to Action
“See how CaféHealth improves accuracy, compliance, and employee experience with AI-powered benefits administration. Start here: CafeHealth.com.”
