An individualized health care plan, where every employee picks what fits.

How ICHRA works. The employer commits to reimbursing a fixed monthly dollar amount toward each eligible employee's individual ACA health insurance premium. The employee chooses their own marketplace plan, pays the premium, and submits proof of enrollment for reimbursement. The reimbursement is tax-free for both employer and employee. From a finance perspective, the employer has fixed spend and no renewal volatility. From an employee perspective, the plan choice is theirs, the network reflects their life, and they own the relationship with the marketplace.

ACA employer-mandate satisfaction via ICHRA. An ICHRA satisfies the ACA's applicable large employer mandate (Internal Revenue Code Section 4980H) when the contribution is large enough that the lowest-cost silver plan in the employee's geographic rating area is affordable. Affordability is defined as 8.39% or less of household income in 2024 (the IRS adjusts this percentage annually). Affordability is tested per employee, per rating area, because silver premiums vary geographically. Benefitra runs the affordability test against your actual census at design time and confirms it remains compliant in every renewal.

Class-based contribution tiers. The ICHRA regulations permit up to eleven employee classes: full-time, part-time, seasonal, salaried, hourly, employees in a collective bargaining agreement, employees in different rating areas, foreign employees working abroad, employees who have not satisfied a waiting period, temporary workers placed by staffing firms, and any combination of two or more. Within a class, contributions must be the same dollar amount, or can vary by age and family size based on a federally permitted age curve. This lets you offer ICHRA to one class and traditional group coverage to another, useful for employers with mixed workforce structures.

ICHRA vs group-plan math. For mid-market employers, ICHRA is typically 10-25% less expensive than equivalent group coverage at the same effective benefit level. The savings come from removing the carrier risk-charge, eliminating the small-group rating volatility, and giving employees the right to take advantage of marketplace subsidies in their personal income range. The trade is that employees handle their own plan selection, which means employer-side education and onboarding becomes more important.

Onboarding + reimbursement administration. ICHRA administration runs through an ICHRA administrator (Benefitra serves this role for many clients). The employee submits proof of marketplace plan enrollment monthly or quarterly. The administrator confirms eligibility and processes the reimbursement, typically via payroll as a non-taxable add-on. Substantiation is critical because ICHRA reimbursements must be documented to maintain tax-free status. Done badly, ICHRA admin creates 20 hours a month of HR work. Done well with a real platform, it takes minutes per month.