By Holly Bengfort on Jul 7, 2026 9:30:00 AM
Rising healthcare costs and changing employee expectations are pushing more employers and benefits consultants to rethink traditional health benefits. Many organizations are turning to the individual coverage health reimbursement arrangement (ICHRA). It offers more personalized coverage options for employees while creating a more predictable benefits strategy for the employer.
With an ICHRA, employers provide tax-free contributions that employees can use toward individual health insurance premiums and, if the plan design allows it, eligible medical expenses. This gives employers greater flexibility, and employees can choose the coverage that fits their needs.
Despite growing adoption, many benefits brokers and employers still hesitate to recommend or switch to the ICHRA due to common myths about ICHRA and how it works.
In this article, we’ll break down six of the most common ICHRA misconceptions.
In this blog post, you'll learn:
- Why ICHRA is a flexible benefits solution for employers of all sizes.
- How ICHRA simplifies benefits administration while giving employees more personalized coverage options.
- The truth behind common concerns about compliance, networks, and long-term cost management.
Misconception #1: ICHRA is only for small businesses
One of the most common misconceptions about the individual coverage HRA (ICHRA) is that it’s only designed for small employers.
ICHRA is a great solution for small businesses priced out of group health plans. But it’s also helpful for larger organizations that want greater flexibility, predictable costs, and scalable benefits.
According to data from the HRA Council1, ICHRA adoption among small businesses increased by 52% from 2024 to 2025. Larger organizations are also embracing the model, with adoption among applicable large employers (ALEs) increasing 34% during the same period.
Additionally, an analysis of Remodel Health customer data in our 2026 National ICHRA Report found that the number of ALE clients grew by 455% from 2024 to 2026.
These trends show that while organizations of all sizes are recognizing the value of a more personalized benefits model, large and enterprise employers are increasingly beginning to offer ICHRA.
Employers use ICHRA to:
- Offer benefits across multiple locations
- Support diverse employee populations
- Extend benefits to part-time or seasonal workers
- Create different benefit strategies for employee classes
- Gain greater control over healthcare spending
ALEs can also use ICHRA to satisfy the Affordable Care Act’s (ACA) employer mandate when structured appropriately, such as by offering an affordable contribution.
Whether your organization has 20 employees or 2,000, you can customize ICHRA to fit your workforce and benefits goals.
Misconception #2: ICHRA is too complicated to implement
Many employers assume moving from a traditional group plan to ICHRA creates an administrative burden.
While there is a learning curve, modern ICHRA platforms like Remodel Health have simplified the process.
A typical implementation includes:
- Establishing contributions
- Defining employee classes, such as part-time and full-time employees
- Educating employees about their options
- Supporting employees through individual health insurance enrollment
- Managing compliance requirements
Rather than increasing administrative work, many employers find that partnering with an experienced ICHRA administrator, like Remodel Health, streamlines benefits management.
With the right support, implementing ICHRA can be much simpler than many employers expect.
Misconception #3: Employees have fewer choices with ICHRA
With group health insurance, employees are often limited to one or two plans selected by the employer.
With ICHRA, employees can choose from a broader range of individual market plans.
Instead of a one-size-fits-all approach, employees can select coverage based on:
- Preferred doctors and healthcare providers
- Prescription needs
- Family circumstances
- Coverage preferences
- Monthly budget
Healthcare needs vary from person to person. ICHRA gives employees the flexibility to choose coverage that fits their unique situation.
That level of personalization can also have a meaningful financial impact, according to Richard Armstrong, Director of Business Development, East at Remodel Health.
"Employees now have the ability to decide their specific level of coverage and risk tolerance,” Armstrong said. “Adding $3,600 to their take-home pay by electing a lower-cost plan may allow them to have greater financial freedom than they did previously. This is especially true when employees aren’t using the full extent of their coverage today. This level of choice empowers employees to make the best decision for them and their families."
For many employees, that level of personalization is one of the biggest benefits of ICHRA.
Misconception #4: Individual market plans have inferior networks
Some employers worry that moving employees to the individual market means sacrificing provider access.
However, network strength depends on the local market, not on whether coverage is offered through a group or individual plan.
In many areas, employees have access to strong networks through individual plans offered by major national and regional carriers.
Because employees are not limited to a single employer-selected carrier, they may have more options to find coverage that includes their preferred providers.
The result is often more flexibility, not less.
Employers should evaluate available plans based on their specific market rather than on assumptions about individual coverage.
Misconception #5: ICHRA isn't ACA-Compliant
Compliance concerns are one of the biggest reasons employers hesitate to explore ICHRA. ICHRA is not a workaround. It’s a legitimate, compliant alternative to traditional group plans. The federal government created ICHRA, and the IRS and other agencies have released guidance on how to offer it compliantly.
When structured correctly, ICHRA can:
- Satisfy ACA employer mandate requirements for ALEs
- Provide employees with minimum essential coverage (MEC) options
- Support employer compliance obligations
- Maintain tax advantages for employers and employees
Like any health benefits strategy, proper administration is critical. Working with an experienced ICHRA partner can help employers meet compliance requirements while reducing complexity.
Misconception #6: ICHRA is a last-resort health coverage solution
Many employers first discover ICHRA after receiving a group health insurance renewal that's out of their budget. As a result, some view ICHRA as a temporary fix. In reality, many organizations adopt ICHRA as part of a long-term benefits strategy.
Unlike group health insurance plans, which can expose employers to unpredictable premium increases, ICHRA uses a defined contribution model. Employers decide how much they want to contribute and build a budget with more confidence.
"Many organizations are tired of the year-to-year rollercoaster they experience with their health insurance renewal and are looking for more predictable forecasts and budgeting targets," Armstrong said.
This creates several advantages:
- More predictable healthcare spending
- Less exposure to renewal volatility
- Greater control over benefits budgets
- Long-term sustainability
For many organizations, ICHRA isn’t just a short-term cost-saving measure. It’s a long-term approach to delivering meaningful health benefits.
Why more employers are turning to ICHRA
The cost of employee health benefits remains one of the largest and most uncertain expenses for organizations.
As employers strive to balance cost-effectiveness with employee satisfaction, ICHRA offers several advantages:
- More predictable healthcare spending. Employers set defined contribution amounts. This creates greater budget certainty and reduces exposure to unexpected renewal increases.
- Greater employee choice. Employees pick the health insurance plan that best fits their needs, preferences, and budget.
- Workforce flexibility. Organizations can design benefits strategies that support different employee classes, locations, and workforce structures.
- Long-term sustainability. Employers can implement a benefits model designed to support long-term financial stability.
Offering an ICHRA through Remodel Health
Offering an ICHRA can transform your benefits strategy, but choosing the right partner matters.
As the nation’s largest ICHRA administrator, Remodel Health helps employers move from traditional group health insurance to personalized benefits with confidence. We combine industry-leading technology with hands-on support to simplify the entire process.
Our team works directly with employers, brokers, and employees to ensure a smooth experience from implementation through renewal.
Whether you’re exploring ICHRA for the first time or looking for a long-term benefits strategy, Remodel Health can help you build a solution that delivers predictability, choice, and lasting value.
Conclusion
While misconceptions about ICHRA still exist, it’s become a proven, flexible alternative to traditional group health insurance. By giving employees more choice and employers greater control over healthcare spending, ICHRA supports both workforce satisfaction and long-term cost predictability.
This article was originally published on October 31, 2024. It was last updated on July 7, 2026.
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