ICHRA for Public Sector and Government Entities

All U.S. citizens rely on fiscally responsible public services. Whether you're a municipality, county, public school district, or other government entity, it’s crucial that you offer competitive employee benefits that don’t blow your budget or take valuable time away from your duties of managing public needs and taxpayer dollars.

An individual coverage health reimbursement arrangement (ICHRA) combines affordability and flexibility. Instead of purchasing a traditional group health plan with volatile annual premium hikes, the ICHRA allows government employers to provide employees with a tax-free monthly allowance that they can use to buy their own individual health coverage. With this defined contribution strategy, you’ll experience predictable healthcare spending while giving your employees the ability to choose the insurance policy that’s best for them.

At Remodel Health, we've helped organizations across the country successfully transition to an ICHRA through guided implementation, administration, and compliance support, so you’re never alone every step of the way. Our expertise and dedicated team members are standing by to help you design a customized ICHRA benefit that’s right for your entity.

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Understanding ICHRA for public sector and government organizations

An ICHRA is a defined contribution health benefit that allows public employers of any size to provide employees with tax-free funds for qualifying individual health coverage. Employers determine a monthly contribution, while eligible employees choose and enroll in individual health insurance coverage that fits their needs, including their preferred carrier, providers, prescriptions, and covered services.

For eligible public employers, an ICHRA is a new benefits strategy that balances fiscal responsibility with competitive employee benefits. Instead of relying on unpredictable group health insurance renewals or taking on the risks of self-funding, organizations can establish a defined healthcare budget while giving employees greater flexibility and choice.

The sections below describe how an ICHRA can workfor government employers.

Employers set a monthly healthcare contribution

Instead of purchasing a group health plan, the employer establishes a fixed, tax-free monthly allowance for eligible employees. There are no contribution limits, and allowances can be customized by age, family status, or federally approved employee classes, such as full-time and part-time employees. Remodel Health works with employers to develop contribution strategies that balance their budgets with competitive employee benefits.

Employees choose their own individual health coverage

Employees enroll in the individual health insurance plan that best fits their providers, prescriptions, medical needs, and family situation. Through Remodel Health's ICHRA platform, employees can compare plans, explore recommendations, and filter options by healthcare providers and medications. Licensed Benefits Advisors are also available to provide personalized guidance to employees with more complex healthcare needs.

Remodel Health manages compliance and administration

Employees must maintain qualifying individual health coverage to participate in an ICHRA, and employers must verify that coverage. Remodel Health simplifies this process. Employees shop through our platform, allowing us to automatically verify and substantiate their coverage. Our team also supports plan documents, required employee communications, and ongoing compliance administration, reducing the workload for public-sector HR teams.

Contributions are used to pay individual health insurance premiums

Once employees enroll in qualifying coverage, their ICHRA contributions can be used toward their monthly premiums. Remodel Health facilitates automated premium payments directly to insurance carriers with more than 99% accuracy and manually processes the remainder while monitoring for issues. For eligible off-exchange plans, Remodel Health can also facilitate pre-tax payroll deductions for the amount above the employer contribution.

Why public employers are reconsidering traditional group health insurance

For many government organizations, medical costs have become one of the fastest-growing budget expenses. Annual premium rate hikes, expensive medical claims, and increased chronic illnesses make it difficult for employers to choose a budget that accurately predicts the following plan year’s healthcare costs. Unlike many private businesses, public employers must justify these increases through annual budgeting processes, board meetings, or public taxpayer hearings, making cost stability a key concern.

Many organizations also employ workers under collective bargaining agreements or long-term labor contracts that make healthcare planning even more complex. Traditional group insurance leaves employers with limited flexibility because annual renewal rates remain largely outside their control.

A defined-contribution ICHRA gives public employers a way to guarantee a predictable budget that they can adjust year-to-year based on funding and goals while still providing a comprehensive health benefit plan to their employees and their families.

The advantages of an ICHRA for public sector and government employers

In addition to worrying about the budget needed to support the people they serve, public sector and government employers need cost-effective health benefit solutions that will provide employees with enough value and support.

An ICHRA helps accomplish both goals by being flexible enough to support all types of public organizations, regardless of financial constraints, workplace demographics, or location.

Employer cost control

Government entities often establish their budgets months before a new fiscal year begins. Unexpected premium renewal increases can result in budget changes, resulting in a less effective health benefit plan or reduced funding available for other projects.

Because ICHRA uses a defined monthly employer contribution strategy, healthcare costs are easier to forecast and manage. This helps organization leaders build more accurate annual budgets that leave other funding untouched.

According to Remodel Health's 2026 National ICHRA Report, government employers contribute an average of:

Self-only

Employees with dependents

Married employees

Married employees with dependents

Average monthly ICHRA contribution

$699

$871

$1,933

$1,913

Greater employee choice

Government workforces include employees with a wide range of healthcare needs, from teachers and first responders to public works employees and administrative staff. An ICHRA allows employees to choose their own individual coverage based on their current health and future medical needs. This personalized approach helps employers attract job seekers with more competitive benefits while giving employees greater ownership over their health.

Improved long-term financial planning

Long-term financial planning is vital for government organizations managing multi-year budgets and funding priorities. Because employers determine their own monthly contribution amount, an ICHRA offers greater stability than other health benefit options. When you know what your healthcare costs will be ahead of time, you can build better benefits strategies and allocate funds to other priorities, making healthcare a line item you don’t need to worry about.

Reduced administrative complexity

Public-sector organizations have enough on their plate managing strict procurement processes, detailed documentation, and complex regulatory standards. Managing group health insurance often requires significant time spent on carrier negotiations, annual renewals, and ongoing benefits administration, which many government organizations don’t have the time or resources to tackle.

With Remodel Health, much of your ICHRA’s administrative responsibility shifts to our experienced implementation specialists, licensed benefits advisors, and enterprise technology platform. This allows your HR and benefits teams to spend less time managing health coverage and more time supporting employees and the public.

Why public employers are choosing to partner with Remodel Health

If you’re a public-sector employer and new to the ICHRA, you’ll need more than software to get you set up — especially if you’re switching from traditional group health coverage. To ensure your benefit has the right structure for your organization, you need a partner that understands custom contribution strategies, federal compliance regulations, and employee education.

Remodel Health works alongside HR directors, benefits administrators, finance leaders, brokers, and organizational leadership to design personalized ICHRAs that align with budgets, goals, and employees' needs throughout the transition period.

Here's what you can expect when you partner with Remodel Health:

A benefits strategy tailored to your organization. We work with your leadership team to design an ICHRA that aligns with your budget, workforce, and long-term goals. If your organization has unionized employees or collective bargaining agreements, we'll help evaluate your options and develop an implementation strategy that supports your negotiated benefits.
End-to-end implementation. Our implementation specialists manage every phase of the transition process, including education, employee communications, and onboarding.
White-glove employee enrollment and education. Throughout the enrollment process, employees can reach out to our support team for help comparing plans, reviewing provider networks, evaluating prescription coverage, and enrolling in health insurance, reducing administrative work for your HR team. Employees with complex coverage needs have access to licensed benefits advisors who provide one-on-one guidance.
Expert compliance guidance. We also help you navigate Affordable Care Act (ACA) and tax reporting requirements, making implementation and year-over-year obligations as hassle-free as possible.
Powerful technology that simplifies administration. Remodel Health's platform streamlines insurance premium payments, compliance tracking, reporting, and payroll processes. Our platform also integrates with more than 200 payroll and HRIS systems, helping your organization manage benefits more efficiently.

Whether you run a municipality, county government, public utility, or school district, Remodel Health can revamp your benefits strategy to keep employer costs low, reduce administrative headaches, and deliver a better overall employee experience.

"At Remodel Health, we provide early education during the evaluation process, making ourselves available to meet with multiple teams, including commissioners, insurance committees, city councils, and employees. We provide a white-glove implementation experience to ensure a positive outcome for our government employees. Education is key, and the Remodel Health team is here to deliver."

Kelsey Frizzell

Territory Sales Lead, Remodel Health

Health insurance costs will continue to rise, but public employers don't have to accept annual premium spikes as the only option. With an ICHRA, government organizations can gain greater control over healthcare spending, improve budget forecasting, and provide employees with a personalized benefit that leaves their health coverage and medical care up to them.

Schedule a chat with Remodel Health to learn how an ICHRA can help you create a comprehensive benefits strategy that can support your organization so you can continue your work serving the public good.

FAQs

Traditional group health insurance requires government employers to purchase a single health plan for eligible employees, leaving organizations subject to annual premium increases determined by insurance carriers or expensive medical claims. An ICHRA eliminates the need for a group plan by giving public employers the ability to set a fixed, tax-free monthly contribution so employees can choose the individual health policy that’s best for them.

Yes. Eligible public employers of all sizes can offer an ICHRA, provided they meet applicable federal requirements, such as establishing plan documents, providing written notices, and meeting ACA affordability standards if they’re a larger company. Remodel Health can help organizations determine eligibility and create a compliant benefits strategy. Multiple government organizations, including county and city governments, administer their ICHRA with Remodel Health.

An ICHRA allows employers to set a predictable monthly contribution that works for their budget. There are also no participation requirements, minimum or maximum contribution limits, and the benefit allows for custom allowance amounts using employee classes, age, or family status. This flexibility improves long-term budget planning and gives employers multiple ways to adjust their contributions during renewal.

Yes, but it depends on their situation. Whether union employees can participate in an ICHRA depends on the terms of their applicable collective bargaining agreement. Remodel Health can work with employers and brokers to review existing agreements and determine the best approach.

Additionally, union employees are an eligible job-based employee class, meaning employers can vary contribution amounts for their group.

Remodel Health provides end-to-end implementation and administration support, including plan design, employee communications, enrollment support, compliance guidance, premium payment administration, and ongoing account management. Our platform and dedicated team reduce the number of benefits administration tasks for employers so they can focus on running their organization, knowing that their employees’ ICHRA needs are fully supported.