INDIVIDUAL COVERAGE HEALTH REIMBURSEMENT ARRANGEMENTS (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
Individual Coverage Health Reimbursement Arrangements (ICHRA) are employer-funded benefit plans that give employees tax-advantaged money to purchase their own individual health insurance and pay for medical expenses. Unlike traditional employer group health plans where the company chooses one insurance option for everyone, ICHRA allows employees to shop for and select their own health insurance plan from the individual marketplace while still receiving employer financial support. The employer sets aside a monthly allowance that employees can use to reimburse themselves for insurance premiums and qualifying medical costs, providing more flexibility and choice in healthcare coverage.
Usage Context
Understanding ICHRA is important when studying employee benefits, health insurance options for employers, tax-advantaged health accounts, and modern alternatives to traditional group health insurance plans. This concept is particularly relevant in discussions about healthcare cost management and employee benefit flexibility.
Common Confusions
- Confusing ICHRA with HSAs - ICHRA is employer-funded while HSAs can be funded by both employer and employee
- Thinking ICHRA is the same as traditional group health insurance - ICHRA allows individual plan selection
- Assuming unused ICHRA funds roll over like HSA funds - ICHRA funds typically don't accumulate
- Believing all medical expenses are reimbursable - only IRS-qualified medical expenses are covered
- Mixing up ICHRA with QSEHRA - ICHRA has no employer size restrictions while QSEHRA is for small employers only
