Individual Coverage Health Reimbursement Arrangement (ICHRA).

A traditional group health plan offers one plan or set of plans selected by the employer, while an ICHRA reimburses each employee for the individual plan they choose themselves. ICHRA delivers broader plan and network choice to employees, predictable monthly costs to employers, and ACA compliance for multi-state and remote workforces.

An ICHRA has no employer-size restriction, no IRS contribution cap, and lets employers vary allowances by employee class. A QSEHRA is limited to employers with fewer than 50 full-time-equivalent employees and follows annual IRS contribution limits. ICHRA fits larger or multi-state workforces, while QSEHRA fits very small businesses without group coverage.

Yes, an ICHRA can satisfy the Affordable Care Act (ACA) employer mandate when the monthly allowance meets the federal affordability threshold for the lowest-cost Silver plan in each employee’s geographic area. YourMedPlan runs the affordability calculation each year so the program defends Applicable Large Employers against Section 4980H penalties.

ICHRA affordability compares the employee’s required premium contribution for the lowest-cost Silver plan in their rating area to a percentage of household income set annually by the IRS. If the employer’s monthly allowance keeps the employee below the affordability threshold, the ICHRA satisfies the ACA employer mandate and protects the employer from penalty exposure.

Each employee enrolls in an ACA-compliant individual major medical plan, then submits proof of coverage and eligible expenses to a third-party administrator. Approved amounts pay through payroll tax-free up to the employer’s monthly allowance. Most platforms support direct premium reimbursement, so the employee does not have to front the cost of the individual plan each month.

Yes, an ICHRA can reimburse Medicare Part A and Part B, Medicare Advantage, Medicare Supplement (Medigap), and Part D prescription drug plans. ICHRA Medicare integration rules give working seniors and Medicare-eligible employees a tax-advantaged way to receive employer support without enrolling in a traditional group plan.

Yes, an ICHRA fits remote and multi-state workforces especially well because each employee enrolls in the local individual market that fits their networks and providers. The employer manages a single budget across the workforce instead of negotiating separate group plans in each state, which is the typical pain point for distributed teams.

Federal regulations require employers to provide eligible employees with a written ICHRA notice at least 90 days before the start of each plan year, and within 90 days of an employee’s first eligibility for new hires. The notice describes the allowance, affordability, and the impact on the premium tax credit. Late notices expose the employer to compliance risk.

An employer cannot offer the same class of employees both an ICHRA and a traditional group health plan, but the employer can offer different classes different programs. For example, a company can offer salaried employees a group plan and full-time hourly employees an ICHRA, as long as each class meets the minimum size and affordability rules. It is important to note that at least 10 employees need to be enrolled in an ICHRA class to run alongside a traditional small group plan.

An employee who fails to enroll in an ACA-compliant individual major medical plan, or who lets their coverage lapse, becomes ineligible for ICHRA reimbursements until coverage is restored. The third-party administrator typically verifies coverage at enrollment and at each reimbursement request to keep the program compliant with federal rules.

Applicable Large Employers (ALEs) offering an ICHRA must report each employee’s monthly offer of coverage on Form 1095-C, including ICHRA-specific affordability codes. Employers must also include ICHRA reimbursements on each employee’s W-2 with the appropriate code.

Most ICHRA programs launch in 60 to 90 days, including plan design, document preparation, payroll integration, and employee education. Employers targeting a January 1 effective date often start the design process in early fall to align with ACA Open Enrollment, which runs from November 1 through January 15 in most states.