What happens to an employee's ICHRA when they leave the company?

When an employee separates from the company—whether through resignation, termination, retirement, or another reason—their ICHRA eligibility ends. However, the impact on their health coverage is different from leaving a traditional group health plan.

The employee keeps their health insurance

One of the key benefits of an ICHRA is coverage portability. Because employees purchase their own individual health insurance policy, that policy belongs to them—not the employer. When employment ends, the employee simply takes over paying the full premium themselves. There's no need to find new coverage or experience a gap, and the employee can continue seeing the same doctors and using the same network.

This is a significant difference from traditional group plans, where coverage ends with employment and the employee must either elect COBRA, find new coverage through the marketplace or another employer, or go uninsured.

ICHRA reimbursements stop

While the employee's insurance policy continues, the ICHRA reimbursements do not. Once employment ends:

• The employer is no longer obligated to reimburse the employee for premiums or other qualified expenses
• The employee becomes responsible for paying their full premium out of pocket
• Any unused allowance for the current month is typically forfeited (employers define the specifics in their plan documents)

Submitting final claims

Employees may still be able to submit reimbursement requests for expenses incurred while they were eligible. Most ICHRA plans include a run-out period—typically 30 to 90 days—during which former employees can submit claims for expenses from their eligibility period.

Employers should communicate this deadline clearly at separation, and departing employees should submit any outstanding claims promptly to avoid forfeiting reimbursements they're entitled to.

For more on submission deadlines, see: How long do employees have to submit ICHRA reimbursement claims?

Rollover funds

If the employer's ICHRA plan allows rollover and the departing employee has accumulated unused allowance from prior years, access to those funds depends on the plan's terms. In most cases, unused allowance—including rollover amounts—is forfeited when employment ends, unless the employee elects COBRA continuation.

COBRA continuation

For employers with 20 or more employees, ICHRA participants have the right to continue their ICHRA benefit under COBRA. This allows the former employee to continue receiving reimbursements for a limited period, but they must pay the full cost of the allowance plus up to a 2% administrative fee.

Whether COBRA continuation makes financial sense depends on the individual's circumstances. For a full explanation, see: Are ICHRA plans subject to COBRA?