ICHRAs

Learn about this popular HRA option that brings freedom and flexibility to both employers and employees.

What is an ICHRA?

An Individual Coverage Health Reimbursement Arrangement (ICHRA) is a benefit some employers offer to help cover health care costs. Instead of providing one group health plan for everyone, the employer gives each employee a set amount of money each month. Employees can use this money, tax-free, to pay for their own individual health insurance premiums and other covered medical expenses. This approach gives businesses flexibility in budgeting and gives employees the freedom to choose the health plan that works best for them.

Key Benefits of ICHRAs

Benefits to Employers

  • Customizable plans – Set different reimbursement amounts for various employee groups (full-time, part-time, seasonal, by location, etc.)
  • Predictable costs – Control spending by setting a fixed allowance; unused funds stay with the employer
  • Tax advantages – Reimbursements are tax-deductible
  • ACA compliance – An affordable ICHRA can satisfy the Affordable Care Act’s employer mandate for large employers


Benefits To Employees

  • Choice and personalization – Select the health insurance plan that fits your coverage needs, preferred providers, and budget.
  • Financial help – Use employer reimbursements for premiums and, if allowed, other qualified medical expenses.
  • Tax-free benefit – Reimbursements are not considered taxable income.

How Do ICHRAs Work?

With an ICHRA, the employer first decides how much to offer eligible employees each month. Employees then shop for and purchase their own individual health insurance—either through the Health Insurance Marketplace or a private insurer—selecting a plan that fits their needs and budget.


After paying their premiums, and in some cases other approved medical expenses like deductibles or copays, employees submit proof of payment. The employer reimburses them up to the set allowance amount, and those reimbursements aren’t counted as taxable income.


Important: To participate in an ICHRA, employees must have individual health insurance coverage—often purchased through the Health Insurance Marketplace.


Read more about ICHRAs at Healthcare.gov