ICHRA Employer Guide | How It Works

Health insurance options are traditionally offered to full-time employees, leaving part-time and seasonal workers in search of ways to supplement their health insurance needs.   For employers who don’t offer health insurance to part-time or seasonal employees, now you can support workers with a flexible benefit called an ICHRA.  An alternative to traditional group health insurance, ICHRAs hold a lot of promise as far as benefits go.  ICHRAs help employers stay competitive with recruiting efforts and can help keep teams more satisfied with their benefit options.  But, how exactly does an ICHRA work, and is it right for your organization?  Follow this ICHRA employer guide for an overview of the plan and general rules.  Learn how employers can use ICHRAs to make healthcare coverage more accessible for all workers.

What is an ICHRA?

An Individual Coverage Health Reimbursement Arrangement, also known as an ICHRA, is a kind of HRA that allows employees to be reimbursed for the health insurance premiums they pay.  Created under the Trump administration in 2019, ICHRAs first became available to employers in 2020.  While they are a relatively new offering, these types of plans are showing considerable growth in the market.  According to the HRA Council, ICHRA adoption has increased significantly from 2023-2024, with an overall 29% increase during last year.  As of 2024, the Council estimates that over 500,000 employees utilize an ICHRA benefit.

ICHRA General Rules

• ICHRAs can be offered by employers of any size.
• There are no minimum or maximum contribution requirements by employers. If the ICHRA benefit doesn’t cover the full premium amount, employees are responsible for paying the remaining premium amount.
• Employees can purchase health insurance directly from a provider or through the ACA Health Insurance Marketplace. Employees can also enroll in Medicare if they’re eligible.
• Employers cannot offer employees a choice between a group health plan and an ICHRA unless they are offered to different classes of employees. For example, full-time employees can be eligible for group health coverage and part-time employees can be eligible for an ICHRA; however, employers are not permitted to allow employees the option of choosing between enrolling in a group health plan or selecting ICHRA.

Plan Designs

In addition to reimbursing health insurance premiums, ICHRAs can be designed to reimburse qualified medical expenses under section IRS code 213(d), including medical, dental, vision and over-the-counter expenses.  This design option is not mandatory and is up to the employer’s discretion.  If an ICHRA is designed to reimburse qualified medical expenses, employees will not be eligible to contribute to a Health Savings Account (HSA).

P&A ICHRA Benefit Solution

ICHRAs are a flexible benefit that empower employees to get health insurance coverage.  If you’re considering adding this plan to your benefit options, our team of employee benefit experts are ready to assist.  Let us answer your questions and help you create a plan that works best for your organization’s needs.  Get started on creating a new benefit option today!

Contact a P&A Benefits Consultant