ICHRA
Back to GlossaryDefinition
A type of employer-funded health benefit plan that allows an employer to reimburse employees for qualified medical expenses, including some or all of the premiums for individual-market health insurance coverage, as well as the cost of out-of-pocket medical expenses
Summary
ICHRA (Individual Coverage Health Reimbursement Arrangement) is an employer-sponsored benefit that allows employers to reimburse employees tax-free for individual health insurance premiums and qualified medical expenses. Unlike traditional group health plans, ICHRA gives employees the flexibility to choose their own individual health insurance coverage while still receiving employer contributions toward healthcare costs.
Usage Context
Understanding ICHRA is important when studying alternative employer healthcare benefit strategies, comparing different types of health reimbursement arrangements, analyzing cost-effective benefits for small to medium employers, and understanding how individual market reforms have created new employer options.
Common Confusions
- Confusing ICHRA with HSA - ICHRA is employer-owned while HSA is employee-owned
- Thinking ICHRA funds roll over like HSA - rollover depends on employer plan design
- Assuming all employees can participate - there are eligibility requirements and classes
- Believing employees can use any health plan - must be individual coverage or Medicare
- Misunderstanding tax implications - reimbursements are tax-free but have specific rules
