ICHRA (Individual Coverage HRA)

What it is

An Individual Coverage Health Reimbursement Arrangement lets an employer give employees tax-free money to buy their own individual Marketplace plans instead of running a group plan. The employee picks any qualifying individual plan; the employer reimburses premiums (and optionally other medical costs) up to a set allowance.

Who it fits

Small business owners who want to offer real coverage without group-plan administration, underwriting, or participation minimums — an ICHRA for a 4-person team is genuinely practical. And employees whose employer offers one: the money is real and tax-free, and you keep the same plan even if you change jobs later (you'd just lose the reimbursement).

What it costs, in plain ranges

For employers: whatever allowance you set — commonly $300–$700 per employee per month — with predictable budgeting and no renewal shock. For employees: the individual plan's premium minus the allowance.

The honest catch

The subsidy interaction. If the ICHRA offer is deemed "affordable" under IRS rules, you cannot take a premium tax credit — even if the credit would have been worth more than the allowance. If it's unaffordable, you may opt out and take the credit instead. Getting this determination right matters, and it's exactly the kind of question worth asking an agent. For business owners: an ICHRA must be offered on the same terms to everyone in an employee class — you can't hand-pick.

How it compares

Against a group plan: less administration, more predictable cost, employee choice. Against doing nothing: a tax-advantaged way to actually help. Employees comparing an ICHRA offer to their own subsidy should run both numbers before opting in or out — the small business guide walks through it.