How ICHRAs Work
An Individual Coverage HRA (ICHRA) allows employers of any size to reimburse employees for individual health insurance premiums on a tax-free basis. Employees choose their own individual health insurance plan — on or off the Exchange — and the employer reimburses them up to the ICHRA amount. There is no federal limit on the ICHRA amount.
ICHRA and the ACA Employer Mandate
An ICHRA can satisfy the ACA employer mandate if it is affordable. For 2026, an ICHRA is affordable if the employee's premium for the lowest-cost silver plan on the Exchange minus the ICHRA amount does not exceed 9.96% of the employee's W-2 wages. Employers who offer an affordable ICHRA are not subject to 4980H penalties.
ICHRA Use Cases
IQ Insight
ICHRAs are most effective for employers with diverse workforces or geographically dispersed employees. A company with employees in 20 states can offer a single ICHRA amount and let each employee choose the best plan in their local market — rather than trying to design a single group plan that works for all 20 states. ICHRAs are also effective for part-time and seasonal employees who are not eligible for the group plan.