When an employee covered under an Individual Coverage Health Reimbursement Arrangement (ICHRA) loses eligibility — typically due to termination of employment — employers often ask whether COBRA applies.
It is important to understand that ICHRA is fundamentally different from traditional group health insurance. Because employees purchase individual, employee-owned health insurance policies, COBRA continuation coverage does not apply in the traditional sense. The individual health plan does not belong to the employer and therefore cannot be “continued” under COBRA in the way a group plan can.
However, the employer may have limited COBRA responsibilities related to the ICHRA allowance, not the underlying insurance policy. Once an employee is no longer eligible for the ICHRA, the employer’s responsibility ends, while Benafica handles outreach to the former employee.
What Happens When an Employee Loses ICHRA Eligibility
Upon the employee’s termination date or loss of eligibility, Benafica will contact the individual directly to explain their post-employment coverage options. These options relate to how they wish to maintain, pay for, or discontinue their individual health plan going forward.
1. Continue Coverage by Paying the Insurance Carrier Directly
The employee may keep their current individual health plan by making premium payments directly to the insurance carrier.
Key points:
- No employer contributions will be available after eligibility ends.
- The employee becomes responsible for the full premium amount.
- Carrier billing will transition to the employee’s personal payment method.
2. Continue Coverage Through BEN360 (Administrative Fee Applies)
Former employees may choose to continue their policy through BEN360, which provides administrative support for ongoing payments.
Important considerations:
- An administrative fee will apply.
- Employer ICHRA contributions stop immediately; therefore, the employee will owe the entire cost of the premium.
- BEN360 will manage payment facilitation but does not reinstate employer funding.
3. Terminate Their Insurance Coverage
The employee may choose to end their individual health plan entirely.
Important: Only the employee can terminate an individual policy — neither the employer nor Benafica can cancel the coverage on the employee’s behalf.
Benafica will advise the employee to contact the insurance carrier directly to process cancellation.
Employer Responsibilities at Termination
Employers are responsible for:
- Ending the employee’s ICHRA eligibility as of their final day
- Ensuring no additional contributions are made after termination
- Updating the ICHRA platform to reflect the change
- Providing any required notices related to loss of coverage or COBRA rights for the reimbursement arrangement (if applicable)
For more information, see our article on Offboarding an Employee.