Offering quality healthcare benefits is a top priority for both employers and benefits consultants, but finding the right solution isn’t always simple. Between traditional group health insurance, health savings accounts (HSAs), flexible spending accounts (FSAs), and individual coverage health reimbursement arrangements (ICHRAs), the landscape can be confusing.
The ICHRA is gaining traction among employers and consultants for several reasons. But how exactly does it differ from other healthcare options?
In this article, we’ll review key differences in flexibility, healthcare costs, and eligibility to help you make the right choice for your organization.
In this blog post, you’ll learn:
The ICHRA is an employer-funded health benefit. Employers offer their employees a tax-free monthly allowance to go toward the cost of their individual health insurance premiums. This can save employers money since individual premiums are often cheaper than group health plan premiums. The ICHRA also provides flexible and customization features. For example, employers can differ allowances by employee class (like full-time or salaried), age, and family size (such as single or married).
Large and small employers can offer an ICHRA. However, this benefit is particularly helpful for applicable large employers (ALEs) since it can meet the Affordable Care Act’s (ACA) employer mandate.
Employees also benefit from the ICHRA. Unlike traditional group health insurance, where the employer chooses one plan for everyone, ICHRA puts the power of choice in employees’ hands. They can pick the plans that work best for them.
Let’s go over some key differences between ICHRA and other popular health benefits.
Let’s compare each health benefit in more detail below.
| ICHRA | Group health insurance | HSA | FSA | |
| Who owns it? | Employer-owned arrangement. | Coverage is tied to employment. | Employee-owned account. | Employer-owned account. |
| Who funds it? | The employer. | The employer and employee share the cost of premiums (fully insured plans). With self-funded plans, the employer pays medical claims directly, though they can still charge a premium to employees. | The employer and employee. | The employer and employee. |
| Is it taxable? | No. It’s tax-free. | No. It’s tax-free. | Contributions and eligible expenses are tax-free. | No. It’s tax-free. |
| Are there contribution caps? | No. | N/A. | Yes. | Yes. |
| What determines employee eligibility? | Employers determine eligibility based on employee classes. Eligible employees need individual health insurance plans to participate. | Any employee offered the benefit by the employer. | Employees must have HSA-qualified HDHPs with no other disqualifying major medical coverage. | Employees who aren’t self-employed can participate. |
| Is it a portable benefit? | The ICHRA isn’t portable. But, the individual insurance plan an employee purchases using their ICHRA allowance is. | No. | Yes. | No. |
Traditional group health insurance is slowly losing its status as the go-to option for employer-sponsored health benefits. Meanwhile, ICHRA is steadily gaining traction and becoming increasingly popular with each passing year.
New data from the HRA Council1 shows a 21% rise in ICHRA adoption between 2024 and 2025. Plus, 92% of employers who offered an HRA last year have chosen to continue with it. This satisfaction speaks for itself.
Here are the main reasons employers are choosing ICHRA plans over other health benefit plans:
We recognize that deviating from the norm can be nerve-wracking. Employers might hesitate to offer an ICHRA, thinking, “Group insurance is what employees expect.”
Don’t let this stop you or your clients from making a healthcare decision that benefits your budget and team. Switching from a group health insurance plan to an ICHRA is only daunting if you do it alone.
At Remodel Health, we’re dedicated to ensuring a smooth transition to ICHRA with our premium, white-glove service provided through our ICHRA+ platform.
Our team of experts handles:
Plus, we make shopping for health insurance easier on your employees. They can compare their options for off-exchange health plans directly through Remodel Health.
At Remodel Health, we believe great benefits require more than software that just keeps you compliant. While others rely on automation alone, we invest in real experts who walk with you every step of the way. From onboarding to renewal, our team is here for you.
The individual coverage health reimbursement arrangement (ICHRA) stands out because it combines cost control with flexibility, a balance that traditional group insurance often can’t achieve. While it may not be the right health benefit for every organization, many businesses are finding that ICHRA offers a modern solution in a rapidly changing healthcare landscape.
Contact a Remodel Health specialist to see if an ICHRA is right for you or your clients.