Individual Coverage Health Reimbursement Arrangements (ICHRAs) offer a distinct approach to employer-sponsored healthcare. Instead of selecting and administering a group health plan, employers provide a defined monthly allowance to employees, who then purchase individual health insurance coverage from the marketplace or a private exchange. This allowance is tax-advantaged for both the employer and employee.
This model allows for greater employee choice and control over health plans, accommodating diverse needs and preferences. It can potentially lead to lower costs for both employers and employees, especially if employees select plans that align with their individual healthcare utilization. ICHRAs also provide a predictable healthcare budget for employers, simplifying financial planning. Historically, pre-Affordable Care Act (ACA), reimbursement arrangements were frequently utilized but became subject to strict regulations. The ACA expanded the usage of ICHRA’s under specific conditions, offering renewed flexibility for employers and potentially better coverage options for employees.
