An Individual Coverage Health Reimbursement Arrangement (ICHRA) represents a major shift away from the traditional defined benefit model — where an employer selects a single group health plan for everyone — to a defined contribution strategy instead. With an ICHRA, employers set a fixed, tax-free monthly allowance for each employee to buy their own individual health insurance. This empowers employees to choose plans that truly fit their needs and budgets. The result is greater flexibility for workers and more cost control and predictability for employers.

How it works:

Employers Don't Choose The Plan

Instead, they set a fixed, tax-free monthly reimbursement allowance for each employee based on classes.

Employees Take Control

They shop for and buy their own individual health insurance plan through the ACA Marketplace that fits them perfectly.

Reimbursement Made Simple

Employees submit proof of premium payments and are reimbursed up to their allowance amount. A third party handles administration and compliance.

This model moves employers out of the business of picking health plans and into the role of a financial supporter, empowering employees to choose coverage that fits their needs.

How ICHRA Differs from Traditional Group Insurance

Traditional Group Plan	ICHRA (The New Model)
Employer selects one or more group plans for everyone	Employer sets a defined dollar allowance; employees choose any plan they want
Premiums are based on the group’s collective risk	Premiums are based on each employee’s age, location, and plan choice
One-stage group quote	Two-stage quoting: employer contribution first, then each employee’s plan
All employees in a class share the same plan options	Employers can set different allowances for different employee classes (e.g., full-time vs. part-time)
Managed under a single group master policy	Employees enroll individually into separate plans