Employer's Guide
Set a health benefits budget you control, and let every employee pick the individual plan that actually fits them. Here is how it works.
The Basics
ICHRA stands for Individual Coverage Health Reimbursement Arrangement. Instead of buying one group health plan for your whole company, you set a tax-free monthly allowance for each employee. Employees then buy their own individual health plans, for example through MNsure, Minnesota's health insurance marketplace, and your business reimburses their premiums up to the allowance.
ICHRAs were created by federal rule and became available to employers in 2020. When the arrangement is set up correctly, reimbursements are tax-free to employees and tax-deductible for the employer. One important condition: an employee must be enrolled in individual health coverage to be reimbursed.
The result is a health benefit that behaves like a defined budget rather than an unpredictable premium. You control the spend. Your employees control the plan.
Step by Step
You decide how much to contribute per employee per month. That number is your health benefits budget. There is no carrier premium driving it, so it only changes when you change it.
Group your team into permitted classes, such as full-time, part-time, or seasonal, and set an allowance for each class. Allowances can also vary by age and family size within the rules.
An ICHRA is a formal arrangement. It needs plan documents and required employee notices. This is paperwork we prepare and maintain for you.
Each employee shops for an individual health plan, for example through MNsure, Minnesota’s health insurance marketplace, or directly from a carrier. Gaining access to an ICHRA opens a special enrollment period, so employees do not have to wait for open enrollment.
Employees submit proof of coverage and premium cost, and you reimburse them up to their allowance. Set up correctly, reimbursements are tax-free to the employee and tax-deductible for your business.
Flexibility
You do not have to offer every employee the same amount. ICHRA rules let you divide your workforce into defined classes and set a different allowance for each class, as long as everyone within a class is offered the same terms. Common classes include:
This makes an ICHRA especially useful for businesses with mixed workforces, such as a core full-time team plus part-time or seasonal staff, where a single group plan never fit everyone well.
The Appeal
You set the monthly allowance, so your health benefits spend is a number you choose, not a premium a carrier hands you.
There is no annual group renewal negotiation. If individual market prices move, you decide whether and how to adjust your allowance.
Traditional group plans often require a share of employees to enroll. An ICHRA has no minimum participation requirement and no minimum company size.
One employee wants the lowest premium, another wants a specific clinic in network. Each person picks the individual plan that fits, instead of one plan chosen for everyone.
An ICHRA asks more of your employees than a group plan does. Instead of being handed one plan, each person has to shop the individual market, compare networks and deductibles, and enroll on their own. For some employees, especially those who have never bought their own coverage, that feels harder, and a poorly supported rollout can sour the whole benefit.
This is exactly where a broker earns their keep. When a licensed advisor sits with each employee, checks their doctors and medications, and helps them enroll, the shopping burden disappears and the choice becomes the advantage it was meant to be.
Side by Side
| ICHRA | Traditional Group Plan | |
|---|---|---|
| Who picks the plan | Each employee picks their own individual plan | Employer picks one plan (or a few) for everyone |
| Employer cost | Fixed monthly allowance set by the employer | Premiums set by the carrier, renegotiated at renewal |
| Renewal increases | None to negotiate; you control allowance changes | Annual renewal can bring significant increases |
| Minimum participation | None | Often required by the carrier |
| Minimum company size | None; works from one eligible employee up | Varies by carrier and plan type |
| Plan portability | Employees own their plans and can keep them if they leave | Coverage generally ends at departure (COBRA may apply) |
| Administrative model | Plan documents, notices, and monthly reimbursements | Carrier billing and group plan administration |
Neither option is universally better. The right answer depends on your headcount, budget, and workforce. We quote both.
Done For You
We model class structures and allowance levels against real individual market prices in your area, so your budget does the most it can for your team.
This is the step that makes or breaks an ICHRA. Our licensed advisors sit down with each employee, compare their options on MNsure and off-marketplace, check their doctors and prescriptions, and help them enroll.
Plan documents, employee notices, reimbursement administration, new-hire onboarding, and a phone number your employees can actually call with questions.
We are a Minnesota agency that helps individuals enroll in marketplace coverage every year, so the individual-plan side of an ICHRA is home turf for us, not an afterthought.
Common Questions
No. When the arrangement is set up correctly, reimbursements are tax-free to employees and tax-deductible for the employer. The employee must be enrolled in individual health coverage to receive tax-free reimbursements.
Yes, within the rules. ICHRA regulations let you group employees into defined classes, such as full-time, part-time, seasonal, salaried, or hourly, and offer a different allowance to each class. Allowances can also vary by age and family size. Within a single class, the offer must be made on the same terms to every employee.
It depends on the offer. In general, an employee who accepts an ICHRA cannot also claim a premium tax credit for marketplace coverage. If the ICHRA offer is considered affordable under federal rules, the employee loses access to the credit even if they decline the ICHRA. Every employee should compare the value of the allowance against any tax credit they may qualify for, and we help each employee run that comparison before they decide.
No. There is no minimum employer size and no minimum participation requirement. An ICHRA can work for a business with a single eligible employee, and there is no upper size limit either.
Timelines vary, but an ICHRA can often launch faster than a traditional group plan because there is no group underwriting process. You need plan documents, required employee notices, and time for employees to choose and enroll in individual coverage. Employees who newly gain access to an ICHRA qualify for a special enrollment period, so a launch does not have to wait for annual open enrollment. We handle the setup and walk every employee through enrollment.
Tell us about your team and we will model an ICHRA against a traditional group plan, with real numbers for your area. No cost, no pressure.
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