ICHRA FAQs

Carriers and plan options vary by market, but many well-known insurance brands offer ICHRA-compatible individual health plans. Even if a specific plan isn’t available in an employee’s area, there is typically a comparable option that provides similar coverage and benefits.

Employees already make complex purchasing decisions every day — whether they’re comparing TVs, choosing auto insurance, or evaluating other personal products. Selecting a health plan is no different.

What employees need most is clear, personalized decision support to understand which options best fit their needs. ICHRA administrators provide exactly that, offering tools and services that guide employees through the selection process. These platforms can even surface plans that closely resemble their current coverage, making the transition smooth and familiar.

Yes — employers can choose to allow employees to use ICHRA funds for qualified medical expenses after their health insurance premiums are fully covered. This can include costs such as deductibles, copays, prescriptions, and other IRS-approved medical expenses. Offering this flexibility gives employees more control over their healthcare spending and enhances the overall value of the benefit.

ICHRAs give employees the freedom to choose the health plans that best fit their personal needs. With this approach, employees take greater ownership of their healthcare decisions while still receiving guidance and education from their employer.

Both the employer and the employee play an active role—and both benefit. Employers gain cost control and flexibility, while employees gain choice, transparency, and support throughout the process.

Once an ICHRA is established, it requires far less hands-on administration than traditional group health insurance. Employers no longer need to shop for group plans, negotiate renewals, or manage benefits directly.

All ICHRA functions are handled through your chosen benefits platform. After you select a platform and set your pre-tax contribution, ongoing administration is minimal—typically limited to occasional updates and routine maintenance.

This reduction in administrative burden frees up valuable time and resources, allowing you to stay focused on running your business rather than managing benefits.

Like any transition in health benefits, moving to an ICHRA requires some upfront effort and may prompt questions from employees. Your benefits administrator plays an essential role in this process—providing clear answers, offering guidance, and helping employees understand why an ICHRA is a beneficial choice for them and the organization.

It’s also important to remember that employers may be required to provide formal notice to employees when implementing an ICHRA. Ensuring these communications are timely and clear helps create a smooth transition and builds employee confidence in the new benefit.

ICHRAs offer a high degree of flexibility, allowing employers to design benefits that fit the structure and needs of their workforce. Employers can choose how and to whom the ICHRA applies:

• All employees can be covered by an ICHRA.

• Some employees can be offered an ICHRA while others remain on traditional group insurance.

• Some employees can receive an ICHRA while others may receive no health benefits.

• All employees can be on an ICHRA with contribution levels that vary by employee class.

Employers can use a wide range of IRS-defined employee classes to structure these contributions, including:

• Full-time employees

• Part-time employees

• Seasonal employees

• Salaried workers

• Non-salaried workers

• Employees in a collective bargaining unit

• Employees in a waiting period

• Foreign employees working abroad

• Employees in the same rating area

• Temporary employees

This level of flexibility allows organizations to tailor health benefits to meet operational, financial, and workforce needs.

ICHRAs work particularly well for employers who:

• Are facing unaffordable group coverage or unsustainable premium increases

• Employ a diverse workforce with varying healthcare needs

• Want to offer more choice and flexibility to attract and retain talent

• Have employees spread across multiple states where no single-carrier group plan works

• Prefer to step away from managing health risk across their workforce

This flexibility makes ICHRAs an appealing option for organizations looking for predictable costs, simpler administration, and a modernized approach to employee benefits.

• An ICHRA can reimburse individual insurance premiums while a traditional HRA cannot.
• A traditional HRA must be “integrated” with a group health plan, whereas an ICHRA works with individual insurance plans.

Yes — an employer can offer an HSA alongside an ICHRA, as long as the ICHRA is providing premium-only contributions (not medical expense reimbursement) and the employee enrolls in an HSA-compatible high-deductible health plan (HDHP). This structure allows employees to take advantage of both tax-advantaged benefits.

Yes — an ICHRA serves as the reimbursement mechanism that allows employees to purchase qualified individual health plans. Employers provide pre-tax contributions, and employees use those funds to pay premiums and, if permitted, other qualified medical expenses.

Because an ICHRA is a reimbursement arrangement rather than a standalone account, the employer retains control of the funds earmarked for employee reimbursements.

• Throughout the year, employees’ unused allowances accrue.

• If an employee does not submit claims for the full reimbursable amount, the employer keeps the remaining funds.

• Employers have the flexibility to either carry over unused funds to the next plan year or reset them at year-end, depending on their policy.

This structure allows employers to maintain budget control while still providing valuable health benefits to employees.

ICHRAs offer complete flexibility in contributions. There are no minimum or maximum limits, and employers can choose to provide different contribution amounts to different groups of employees. This allows benefits to be tailored to workforce needs while maintaining budget control. However a QSEHRA does have maximum liimits!

Yes — employers can contribute pre-tax dollars to an ICHRA, which employees can then use to pay for Medicare premiums and Medicare supplemental insurance costs. This makes ICHRAs a flexible option for employees who are Medicare-eligible, extending the benefit to a wider range of the workforce.

In October 2017, President Trump issued an Executive Order directing the Departments of the Treasury, Health & Human Services, and Labor to expand the usability of Health Reimbursement Arrangements (HRAs).

The resulting Individual Coverage HRA (ICHRA) rules were released in June 2019 and became effective in January 2020, allowing employers to offer a flexible, employee-directed approach to health benefits.