An Individual Coverage HRA lets an employer of any size reimburse employees tax-free for individual-market premiums and medical costs instead of offering a group plan. Employees must enroll in qualifying individual coverage, and different classes of employees can receive different allowances.
Any size employer can offer an ICHRA. Employees (and reimbursed dependents) must have qualifying individual coverage or Medicare, and the employer can’t offer the same class of employees both an ICHRA and a traditional group plan.
The employee picks an individual plan (on the ACA marketplace or off-exchange) or Medicare, enrolls in it, and then submits proof to get reimbursed up to the employer’s ICHRA allowance. A new ICHRA offer triggers a special enrollment period to buy a plan.
An ICHRA reimburses employees tax-free for individual health coverage and counts as an offer of coverage for the employer mandate. A health stipend is just taxable extra pay; simpler, but taxed for both sides and not a compliant offer of coverage.
No. To use ICHRA funds you must be enrolled in qualifying individual coverage or Medicare. Coverage under a spouse’s group plan doesn’t qualify, so you couldn’t be reimbursed through the ICHRA while on that plan.
A taxable health stipend is simple; extra taxable cash employees can use for coverage, but it’s taxed for both sides and doesn’t satisfy the employer mandate. An ICHRA reimburses individual coverage tax-free and can satisfy the mandate, so it’s usually the better structured option.
No. Unlike a QSEHRA, an ICHRA has no maximum contribution limit; employers set the allowance, which can vary by employee class and by age or family size.
An ICHRA lets an employer of any size reimburse employees tax-free for individual-market health insurance premiums (and often other medical costs) instead of offering a traditional group plan. Employees must be enrolled in qualifying individual coverage or Medicare, verified monthly.
A QSEHRA is only for employers with fewer than 50 FTEs and no group plan, has statutory dollar caps, and is not an ERISA plan (no COBRA). An ICHRA is for employers of any size, has no dollar cap, allows up to 11 employee classes, can run alongside a group plan for other classes, and IS an ERISA group health plan.
If the HRA offer is “affordable,” it blocks the premium tax credit: the employee takes the HRA instead. If it’s unaffordable, the employee may opt out and keep the PTC. A QSEHRA also reduces the PTC dollar-for-dollar, while an ICHRA is all-or-nothing.
ICHRA lets employers give workers a defined, tax-free dollar amount to buy their own individual coverage instead of running a group plan. Adoption has grown about 1,000% since 2020, recently roughly +34% a year among larger employers and +52% among smaller ones, pushed by steep group renewals and the end of enhanced subsidies.