As healthcare costs continue to rise, employers and their broker consultants are searching for benefit solutions that protect their budgets while still giving employees access to meaningful coverage. The individual coverage health reimbursement arrangement (ICHRA) has quickly become one of the most powerful tools for achieving both.
With an ICHRA, employers can reimburse employees tax-free for qualified medical expenses. But understanding exactly what counts as an eligible expense is essential for staying compliant and maximizing your benefit.
In this article, we’ll break down the types of expenses eligible for reimbursement through an ICHRA and how offering an ICHRA works with Remodel Health.
In this blog post, you’ll learn:
Find out how ICHRA can boost employee satisfaction and retention at your organization.
The individual coverage HRA (ICHRA) is an employer-funded benefit. It allows organizations of any size to reimburse employees for more than 200 eligible medical expenses, including individual health insurance premiums.
Unlike traditional, one-size-fits-all group health insurance, an ICHRA allows employees to shop for and enroll in the coverage that fits their needs and budget. Employees get more choice, and employers get budget control and predictability.
ICHRA adoption continues to climb as organizations of all sizes shift away from unpredictable group health plans. According to the HRA Council, ICHRA adoption grew 34% among large employers from 2024 to 2025.
Here’s why:
The traditional ICHRA reimbursement process is straightforward.
Here’s how it works:
However, Remodel Health has a more modern approach to handling individual health insurance premiums. Rather than having employees front the cost of their premiums and request reimbursement for their expenses, we’ve automated the process. Employers deposit their employees’ ICHRA contributions into an account with Remodel Health. We split these funds into FDIC-insured accounts for each employee. Then, we pay the carrier directly for employees’ premiums.
This saves employers and employees the hassle of reviewing reimbursement requests and waiting for reimbursement each month. Plus, when an employee enrolls in an off-exchange plan, the employer can establish a pre-tax deduction for any excess the ICHRA contribution doesn’t cover.
While most employers choose to only provide ICHRA contributions for premiums, they can also reimburse employees for qualified out-of-pocket medical expenses.
Employers can reimburse employees for qualified medical expenses listed in Internal Revenue Code §213(d). IRS Publication 502 outlines these qualified medical expenses. An ICHRA can reimburse any of these expenses, as long as the employer chooses to allow them.
Let’s review some of the most commonly reimbursed categories. This is not an exhaustive list. For the full list, see IRS Publication 502.
Premiums are the most frequently reimbursed ICHRA expense.
Employees may use ICHRA funds to pay for:
This is a significant benefit given the rising cost of medications. According to the American Journal of Health-System Pharmacy1, the U.S. spent more than $722 billion on prescription drugs in 2023. That’s a 13.6% increase from 2022, marking the largest uptick in spending in 20 years.
Employees can receive reimbursement for:
An ICHRA can reimburse individual dental insurance premiums. It can also reimburse dental expenses.
Even without a dental insurance plan, employees can receive reimbursement for:
On top of individual vision insurance premiums, employees can receive reimbursement for vision expenses.
ICHRA reimbursement can also include:
Preventive care is a key part of maintaining long-term health.
Eligible expenses include:
According to a 2024 National Alliance on Mental Illness2 (NAMI) poll, 92% of employees said mental healthcare coverage is important for creating a positive workplace culture. About one in five said it’s difficult to find mental healthcare that’s affordable through their employer.
With mental health needs growing nationwide, ICHRAs provide coverage for:
Some employees may seek nontraditional or holistic treatments. However, they need a doctor’s note for some treatments to verify medical necessity.
With proper documentation, an ICHRA can reimburse:
This is an important difference from group health plans, which often require higher premiums for dependents.
An ICHRA can reimburse eligible expenses for:
While hundreds of items and services are eligible for reimbursement under an ICHRA, some exclusions do apply.
The IRS excludes certain expenses, including:
Remodel Health’s ICHRA+ solution eliminates tedious administrative tasks, giving employers more time to focus on other aspects of their businesses.
Our experts handle:
Our platform integrates with more than 200 payroll and HRIS systems to further streamline processes and enhance your team’s efficiency. Additionally, employees can conveniently shop for individual health plans directly through their Remodel Health accounts.
The individual coverage health reimbursement arrangement (ICHRA) gives employers a modern, flexible alternative to traditional health insurance. It prioritizes budget stability while empowering employees with meaningful choice. Understanding which expenses qualify for reimbursement is central to keeping your benefit compliant and effective.
At Remodel Health, we make the entire process easier. Our platform helps employees choose the best individual plan and ensures every reimbursement aligns with IRS regulations.