How does ICHRA differ from other healthcare options?

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:

• How the individual coverage HRA (ICHRA) works.
• How it compares to a group health plan, HSA, and FSA.
• How to offer an ICHRA through Remodel Health.

What is the individual coverage HRA (ICHRA)?

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.

Key differences between ICHRA and other healthcare options

Let’s go over some key differences between ICHRA and other popular health benefits.

1. ICHRA vs. Traditional group health insurance

• Group health insurance: Employers offer a single health insurance plan for all of their employees. Costs and coverage are fixed, regardless of individual needs.
• ICHRA: Employers offer employees an allowance for individual plans they purchase themselves. This offers flexibility and personalization.
• Key difference: Group health insurance is one-size-fits-all, while ICHRA provides individualized coverage at a more affordable rate. The ICHRA also provides cost control thanks to defined contributions.

2. ICHRA vs. Health savings account (HSA)

• HSA: A tax-advantaged savings account employees can use to pay for qualified medical expenses. Employees and employers can both contribute, but HSAs require enrollment in a high deductible health plan (HDHP).
• ICHRA: Only employers fund the ICHRA. Unlike an HSA, an ICHRA can help pay for employee individual health insurance premiums.
• Key difference: HSAs are savings accounts owned by employees, while ICHRAs are employer-funded arrangements tied to health insurance coverage.

3. ICHRA vs. Flexible spending account (FSA)

• FSA: FSAs are arrangements that employees fund through pre-tax salary deductions, and sometimes employers contribute. FSAs allow employees to set aside pre-tax dollars for medical expenses.
• ICHRA: Only employers can fund an ICHRA. Unlike an FSA, employees can use their allowance on individual health insurance coverage.
• Key difference: FSAs are owned by employees and don’t cover health insurance premiums. ICHRAs are employer-owned and help employees with the cost of their individual health plans.

Health benefit comparison chart

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.

Why employers are choosing ICHRA as a health insurance solution

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:

• Cost control: Employers set predictable budgets while avoiding annual premium increases tied to group insurance.
• Employee choice: Workers can shop for the plans that meet their unique needs on the Health Insurance Marketplace or from a carrier directly. Remodel Health allows employees to shop for off-exchange plans right from our software.
• Tax advantages: Monthly contributions are tax-free for employers and employees.
• Scalability: Works for large and small employers across multiple states.
• Employee satisfaction: Employees benefit from personalized health insurance coverage.

Remodel Health makes offering ICHRA easy

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:

• Onboarding and support
• Plan design
• Legal plan documents
• AutoPay for employee individual health insurance premiums
• Required ICHRA plan notices
• Providing necessary data for compliance filings

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.

Conclusion

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.

1. https://www.hracouncil.org/report