How does an ICHRA differ from a traditional group health plan?

While both ICHRAs and traditional group health plans are employer-sponsored health benefits, they differ significantly in structure, administration, and how employees experience their coverage.

Plan Selection and Coverage

With a traditional group health plan, the employer selects one or more insurance plans from a carrier, and employees choose from those options. The employer controls the plan design, network, and coverage details. With an ICHRA, employees select their own individual health insurance plan from the open market, giving them the flexibility to choose coverage that best fits their personal or family needs—including preferred doctors, networks, and plan types.

Funding and Cost Structure

In a traditional group plan, employers typically pay a significant portion of the premium, and employees often share the cost through payroll deductions. Premium costs can vary year to year based on the group's claims experience and market conditions. With an ICHRA, employers set a fixed allowance amount, creating predictable budgeting. Employees use that allowance to pay for their individual coverage, and if their premium exceeds the allowance, they pay the difference out of pocket.

Risk and Participation

Traditional group plans require a certain level of employee participation and pool risk across the group, which can make them more complex for smaller employers or those with diverse workforce needs. ICHRAs have no participation requirements—each employee's coverage is individual, so there's no pooled risk or participation threshold to meet.

Portability

Coverage under a traditional group plan ends when employment ends (outside of COBRA options). With an ICHRA, employees own their individual policy, so they can often keep their coverage if they leave the employer—they simply take over paying the full premium themselves.