How ICHRA helps you avoid renewal surprises and premium increases

Employers and HR professionals often face challenges when preparing for their group health plan’s annual renewal period. Premium rate hikes, carrier updates, and changes to covered services can make it difficult to plan your budget or offer attractive health benefits. As a result, many employers approach renewal feeling anxious about their financial obligations and plan options.

Luckily, the individual coverage health reimbursement arrangement (ICHRA) offers a way to alleviate your renewal headaches. By replacing a traditional group plan with this defined contribution ICHRA benefit, you can gain predictable control over your budget while giving your staff the freedom to choose the individual coverage that works best for them.

This article breaks down how an ICHRA can help you avoid renewal surprises so you can make the end of your health benefit’s plan year less stressful.

In this blog post, you’ll learn:

• How an ICHRA works and why it offers more flexibility and predictability than traditional group health insurance.
• Why the ICHRA helps prevent renewal season surprises and spikes in health insurance premiums.
• How an ICHRA gives employers and employees more control over their budget and health coverage.

What is the ICHRA?

An ICHRA is an employer-funded health benefit that serves as an effective alternative to traditional group insurance. Instead of purchasing a single group policy for all your employees, regardless of their individual health needs and coverage preferences, the ICHRA allows you to provide your staff with a set monthly contribution amount that they can use to buy individual health insurance plans.

There are three easy steps to how the ICHRA works: 

1. You choose your contribution limit. Employers determine the amount of tax-free money they want to offer their W-2 employees, based on their budget and goals. There’s no cap on ICHRA contributions, and you can adjust the amount by job-based employee classes, age, or family size.
   1. Applicable large employers (ALEs) can use an ICHRA to satisfy the Affordable Care Act’s employer mandate as long as they offer an affordable ICHRA allowance to at least 95% of their full-time employees and their dependents.
2. Employees pick their own coverage. Participating employees buy health insurance plans on the individual health insurance market. To use the ICHRA, they must have a qualifying individual health plan that provides minimum essential coverage (MEC).
   1. Spouses and dependents of enrolled employees can also participate in the benefit if the employer’s ICHRA design allows it and they have proper coverage.
3. Contributions are tax-advantaged. Employees apply their ICHRA allowance toward their monthly medical plan premiums. With Remodel Health, this happens automatically; there’s no need for employees to front the cost and wait for reimbursement. All contribution amounts are payroll-tax-free for employers and income-tax-free for employees.

How does the ICHRA help you avoid annual renewal surprises?

Annual health insurance renewals often come with sudden premium increases and unexpected plan changes. Even the most prepared employers may end up needing to adjust their budgets or offering a less-than-desirable health plan that their employees may not value. But with an ICHRA, you can avoid much of the uncertainty that renewal season brings. Let’s take a closer look at how it works.

1. You don’t have to negotiate with insurance carriers.

An ICHRA eliminates having to negotiate with health insurance companies every year. Because the ICHRA doesn’t require the purchase of a traditional group policy, you don’t need to work with an insurance company at all. 

Without the cycle of quoting, negotiating, and renegotiating, you can skip the stress of rising group premiums, which can sometimes increase by 5–20% or more in a single year¹. Instead, you set a predictable, employer-defined budget allowance that isn’t impacted by carrier decisions that you may not agree with or be able to afford. Not relying on an insurer also helps to keep costs stable, prevents last-minute surprises, and reduces the administrative burden of your HR team.

2. You can adjust your contribution amounts.

With an ICHRA, you can determine the contribution amount each year and can raise or lower it at the end of the plan year based on your budget, benefit utilization, inflation, and company goals. Because there are no minimum or maximum contribution limits, you have complete control over how much of an ICHRA allowance you want to offer without navigating carrier restrictions.

For greater customization, you can also tailor contributions by employee classes (such as full-time, part-time, or seasonal workers), age, or family size to better meet the needs of your workforce. This flexibility allows you to allocate financial support to employee groups who need it most while maintaining complete cost control.

3. There are no minimum participation requirements.

Unlike traditional group health plans, an ICHRA doesn’t require a minimum number of employees to enroll in the benefit. Suppose several employees opt out of the ICHRA or already have health coverage from another source, such as a spouse’s plan. In that case, it doesn’t impact your ability to offer the benefit or expose you to higher premium rates.

This key feature eliminates the risk of being dropped from a plan during renewal time due to low participation, which is a common issue that employers with traditional group insurance often face. Even if you’re a small business owner, have a part-time or seasonal staff, or have a high turnover, you don’t have to encourage employees to enroll to meet participation thresholds. Whether half of your employees enroll or nearly all do, your ICHRA remains compliant and available.

4. Employees can shop for their own medical plans.

An ICHRA allows your staff to choose their own individual health coverage, rather than relying on a single group option. They can compare plans, provider networks, and prices to find a plan that works for them. This way, your ICHRA benefit is a guaranteed valued benefit as your participating employees can use their allowance to pay for their monthly premiums, and, if your ICHRA design allows it, other out-of-pocket costs. 

Because employees select their own coverage, employers encounter fewer mid-year surprises tied to network changes or adjustments in insurance rates. It also reduces the pressure on employers to choose a group plan that will work for everyone. When employees pick their preferred plan, employers save time and face fewer requests to switch carriers or adjust benefits when their renewal date arrives.

5. Unused ICHRA funds stay with the employer.

At the end of the plan year, any of your employees’ unused ICHRA allowances stay with you — even if they choose a cheaper individual plan during renewal or leave the company. For example, if you offer $500 per month, but an employee’s premium is only $350, you’re only spending $350 per month instead of the $500 you budgeted for. This model prevents overspending and keeps your annual costs stable, unlike group plans, which can experience insurance rate changes due to adjustments in employee elections or the risk pool. 

Because you only pay for what your employees use, your spending stays consistent and aligned with your employees’ needs. Over time, this leads to more predictable financial outcomes, so you can better budget for your company. Unused funds can be redirected into future benefit planning, compensation strategies, or other company expenses, giving you more flexibility than traditional group coverage allows.

How does ICHRA impact group health insurance brokers?

If you’re a broker consultant or you work with a broker, you can still offer an ICHRA. The ICHRA doesn’t eliminate opportunities for brokers — it expands them. 

Brokers can partner with Remodel Health to recommend ICHRA to employer groups while continuing to earn commissions through our flexible revenue-sharing model. Instead of losing business when a traditional group plan isn’t the right fit, brokers gain a flexible alternative that keeps their clients happy.

Conclusion

The health insurance renewal season can be a stressful time of the year. But an ICHRA can avoid most of the drama. Instead of waiting for the inevitable rate increases or back-and-forth conversations with your insurance company, you set your preferred allowance, and employees choose the coverage and medical costs that work best for them and their families. In return, you’ll stabilize your budget and offer a personalized health benefit that your employees will love.

If you want to make the switch from group health insurance to an ICHRA, Remodel Health is here to help! Book a call with us today to learn more about the ICHRA and how it can meet the needs of your organization.

References

1. How much and why premiums are going up for small businesses in 2026