Navigating offering ICHRA for the first time: Tips for admins

Offering an individual coverage health reimbursement arrangement (ICHRA) for the first time can feel scary, especially if you’re an employer or HR professional who is used to traditional group health insurance. Even if you think you have a handle on the plan design and setup, you still need to effectively communicate the benefit to your employees and ensure a smooth transition.

Luckily, when armed with the correct information and an HRA administrator, offering an ICHRA doesn’t have to be overwhelming. This guide focuses on helping first-time ICHRA adopters understand the benefit and manage the potential pitfalls that may come their way.

In this blog post, you’ll learn:

• What it means to offer an ICHRA for the first time and how it differs from traditional group health insurance.
• How to educate and communicate with employees about the basics of the ICHRA.
• How partnering with Remodel Health simplifies ICHRA administration for you and your employees.

1. Understand what it means to offer an ICHRA

If this is your first time offering an ICHRA, you should know how it works in comparison to traditional models. Rather than purchasing a single group health plan and splitting the premium with employees, the ICHRA allows employers to set a defined monthly contribution that employees can use to buy their own individual plans, and sometimes, if the employer enables the feature in the plan design, out-of-pocket medical expenses.

Unlike traditional group health plans, which have rate hikes and participation requirements, ICHRAs don’t require minimum employee participation and have no annual contribution limits. They also allow employers to adjust contribution amounts by employee class, age, or family status. This level of flexibility makes the ICHRA an excellent option for companies with diverse workforces, multi-state workers, or seasonal staff members.

However, transitioning from group healthcare coverage to this more modern benefit can be confusing for both employers and employees. That’s where having the right ICHRA vendor comes in. Remodel Health simplifies the transition by handling the heavy lifting, such as helping you create a customized ICHRA strategy and guiding you through design, employee classes, and choosing the right contribution amounts.

2. Educate your employees on what they need to know about the ICHRA

Your employees are likely to be new to the ICHRA as well, so you’ll need to educate them before implementing the benefit. Doing this early will reduce confusion and increase participation.

ICHRAs require employees to enroll in a qualifying individual health plan that provides minimum essential coverage (MEC) to participate in the benefit. So, your first step is explaining which health plans qualify.

Qualifying health insurance coverage includes:

• ACA-compliant individual coverage
• ACA-compliant student medical insurance
• Medicare Parts A and B together
• Medicare Advantage (Part C)
• Catastrophic health insurance policies (for those who qualify)

They’ll also need to know the relevant enrollment windows. For example, employees who are newly eligible for an ICHRA have a 60-day special enrollment period to buy a qualifying individual plan. If your ICHRA’s effective date is January 1, employees can enroll in a plan during the annual Open Enrollment Period.

Lastly, employees should know that their ICHRA allowances are income-tax-free and can be used to pay for monthly insurance premiums and other qualified medical expenses if you include those in your plan design.

Remodel Health helps educate your employees by providing digital resources, live education webinars, on-site visits, and one-on-one support from licensed benefits advisors. With our materials and guidance, we help explain how the ICHRA works and how employees can enroll in health plans that meet their needs. Our platform also allows your employees to enroll in an individual health plan right from their accounts.

3. Communicate the transition to the ICHRA to your employees

Clear and frequent communication is key to a smooth ICHRA transition. Many employees will only be familiar with traditional group coverage, so you should communicate early to reduce anxiety and prepare them properly.

Your first employee communications should:

• Explain what the ICHRA is
• How it works
• Why your company is making the change
• Detail your employees’ next steps, such as preparing to enroll in individual health insurance coverage

The federal government requires employers to provide a written ICHRA notice to eligible employees at least 90 days before the start of the plan year, or by the date coverage can first begin for employees who become eligible later¹. According to the ICHRA final rules, these notices must include details about the ICHRA, the requirements for substantiating coverage, and how the ICHRA impacts premium tax credit eligibility².

Remodel Health makes this communication process easy by supplying and sending out notices on your behalf, ensuring your notices meet federal requirements and employees receive them promptly. We also provide a wide variety of materials — such as emails, flyers, and live sessions — tailored to your workforce’s needs so your employees have the proper guidance.

4. Prepare to answer employees’ questions and concerns

It’s normal for employees to have questions about how an ICHRA will impact their coverage, out-of-pocket healthcare costs, and access to medical care. Expect questions about shopping on the individual market, provider networks, and the timing of reimbursements or payments. Prepare your HR team with the right information so they can give thoughtful and accurate answers and guide employees through their concerns.

Remodel Health’s licensed benefits advisors are available to help answer employee questions directly. They provide one-on-one support, help employees compare individual health plans, and assist them through the enrollment and reimbursement process—relieving your HR team of much of the day-to-day support load.

Once your benefit launches, your employees will also have access to our customer care team, who can help them understand their benefits and address any issues or questions.

5. Ensure you know how ICHRA payments or reimbursements work

An ICHRA provides a tax-free contribution that employees can use for their individual plan premiums and, if applicable to your plan design, qualified medical expenses, up to the monthly contribution limit you set in advance. However, first-time ICHRA adopters often misjudge the documentation review process.

Traditionally, with an ICHRA, employees pay for health insurance premiums and eligible expenses upfront. Then, they submit receipts for reimbursement. After the employer reviews and approves the claim, they schedule the expense for reimbursement. But this manual process can be time-consuming.

Remodel Health’s ICHRA+® platform automates the premium payment process by setting up FDIC-insured individual accounts for each employee and paying health insurance premiums directly to carriers on their behalf from your contributions. This means employees don’t need to pay upfront and submit claims for their insurance every month, and employers avoid manual reimbursement reviews for coverage.

ICHRA contributions are income-tax-free for employees and tax-deductible and payroll tax-free for employers. Having clear documentation of your reimbursements also helps with compliance with tax reporting later in the year or in case of an audit.

6. Remember to stay compliant with federal regulations

Compliance is a key concern for first-time ICHRA sponsors. Like other employer-sponsored health benefits, there’s a lot to know, and a mistake can result in costly penalties.

Beyond communication requirements and notices, you must also:

• Draft legal plan documents
• Use job-based employee classes according to federal rules
• Satisfy tax reporting obligations, such as filing IRS Forms 5500 and Form 720
  • Applicable large employers (ALEs) must report their ICHRA on Forms 1094-C and 1095-C
• Ensure your ICHRA complies with ERISA, HIPAA, COBRA, and the Affordable Care Act’s employer mandate (if you are an ALE)
• Track your ICHRA’s affordability using safe harbors

Remodel Health helps you satisfy these obligations by drafting required plan documents, administering ICHRA notices, and providing data and instructions for compliance filings. With integration into major payroll and HR systems, we streamline recordkeeping and reduce the risk of errors on your ACA reporting.

Visit our blog to learn more about the key ICHRA compliance regulations.

7. Avoid common first-year ICHRA errors

It’s not unusual for HR leaders and employers to run into pitfalls in their first year of offering an ICHRA. For example, one frequent issue is not communicating with employees enough, resulting in low participation or missed enrollment deadlines. Another is confusion about how reimbursements or payments work. Business owners may also miss necessary compliance requirements, which can result in tax penalties for their business.

At Remodel Health, we help to avoid these potential roadblocks by providing information and support. Whether you need enrollment education, compliance assurance, or something in between, we reduce the administrative risks that often arise during a first-year ICHRA launch.

Read our blog to get insights on common ICHRA mistakes and how to avoid them.

8. Provide ongoing employee support after the ICHRA launches

Employees will continue to have questions throughout the year, especially if they experience a qualifying life event, plan premiums change, or simply want to utilize their benefit better. Providing ongoing support and regular check-ins ensures that employees have the necessary information to get the most out of their ICHRA, and ensures high satisfaction and participation with the benefit.

Remodel Health’s year-round support includes access to dedicated account managers and customer success representatives for both employers and employees. We help with provider searches, insurance company questions, and more, so you and your employees never feel alone.

How Remodel Health can help you simplify ICHRA administration

Switching from group health insurance to an ICHRA can feel complex. However, partnering with Remodel Health can make it easier. Our ICHRA+® administrative solution offers hands-on, full–service support at every step, from plan evaluation and design to employee onboarding, premium payments, compliance documentation, and ongoing employee support.

Our licensed benefits advisors guide employees through plan selection and enrollment so they understand how to navigate the individual market. Once your benefit is active, our platform automates premium payments, integrates with payroll and HR systems, and ensures your ICHRA remains compliant with federal rules. With our help, you don’t have to worry about missing any financial or legal responsibilities.

Whether you’re an employer implementing an ICHRA for the first time or a broker looking to better educate your clients on alternative health benefits, Remodel Health takes the stress out of offering an affordable ICHRA.

Conclusion

While the first year of launching an ICHRA can be a significant learning curve, having the right ICHRA partner makes all the difference. With clear communication, ongoing education, and year-round support, you can avoid common mistakes and set your ICHRA up for long-term success.

As the leading ICHRA vendor today, Remodel Health helps simplify the administration process from start to finish, so you can deliver a personalized health benefit that employees value and trust. Book a call to learn more about our ICHRA+® solution and the hands-on services we offer.

This blog post was originally published on July 28, 2023. It was last updated on January 12, 2026.

References

1. CMS - ICHRA: Policy and Application Overview
2. 2019 ICHRA Final Rules