ICHRA stands for Individual Coverage Health Reimbursement Arrangement. It is an employer-funded health benefit that allows employers to reimburse employees tax-free for individual health insurance premiums and, in some cases, other qualified medical expenses.

Rather than selecting and managing a traditional group health insurance plan, an employer offering an ICHRA sets a monthly allowance for each employee. Employees then purchase their own individual health insurance coverage—typically through the ACA marketplace, a private exchange, or directly from an insurance carrier—and submit their premium expenses for reimbursement up to their allowance amount.

ICHRAs became available on January 1, 2020, following regulations finalized by the Departments of Treasury, Labor, and Health and Human Services. They were designed to expand employer options for providing health benefits and to give employees more choice and portability in their health coverage.

Key characteristics of an ICHRA:

• Funded entirely by the employer (employees cannot contribute)
• Available to employers of any size, from one employee to thousands
• Reimbursements are tax-free for employees and tax-deductible for employers
• Employees must be enrolled in individual health coverage that meets minimum essential coverage (MEC) requirements to participate
• There is no minimum or maximum contribution limit—employers decide how much to offer