Understanding ICHRA: What it is and how it works

An Individual Coverage Health Reimbursement Arrangement (ICHRA) is an employer-funded benefit that reimburses employees, tax-free, for health insurance they buy on their own. Your employer sets a monthly allowance, you choose the individual plan that fits you and your family, and you’re reimbursed up to that amount.

How an ICHRA works

1. Your employer sets up the plan. They choose the allowance, the start date, and which employee groups are eligible. Within a group, the same terms generally apply to everyone, though the allowance can vary by age or family size.
2. You receive a notice. It explains your allowance, when the plan starts, and that you need individual coverage to receive reimbursement.
3. You shop for coverage. You shop for a plan directly on our platform, BEN360. You can also purchase coverage through the Marketplace or an individual insurance agent, but using BEN360 is the most straightforward way to purchase your coverage.
4. We verify and enroll you in your coverage. Once you’ve submitted your plan choice in BEN360, we work on the backend to get you set up and enrolled.
5. You get reimbursed. Your premium payments are automatically paid with your employer’s contribution through BEN360 every month. Any additional cost above and beyond what your employer contributes is deducted from your paycheck.

Important: You must be enrolled in individual health coverage to receive ICHRA reimbursements. Coverage through a spouse’s employer group plan doesn’t qualify.

What an ICHRA can pay for

What’s covered depends on how your employer designed the plan. Check your plan documents or ask your administrator to confirm.

Commonly eligible:

• Individual health insurance premiums (Marketplace or off-exchange)
• Medicare premiums, if your plan allows
• Qualified medical expenses under IRS rules, if your employer has included them, such as deductibles, copays, coinsurance, prescriptions, dental, and vision

Typically not eligible:

• Premiums for group coverage, including a spouse’s employer plan
• Expenses the IRS doesn’t consider qualified medical expenses
• Expenses incurred before your coverage or plan start date
• Amounts above your employer’s allowance

ICHRA vs. a group health plan: what’s different for you?

With a traditional group plan, your employer picks the plans and you choose from that menu. With an ICHRA, your employer gives you a monthly allowance and you choose your own plan from the individual market.

What this means in practice

• More choice, more responsibility. You can find a plan that matches your health needs and budget, but you’re the one comparing plans and enrolling.
• Your costs depend on the plan you pick. If your plan costs more than your allowance, you pay the difference. If it costs less, your employer’s rules determine whether the leftover can go toward other eligible expenses.
• Your plan stays with you. Because you own your individual plan, you keep it if you change jobs, though your ICHRA reimbursements stop.

Things to know

• Premium tax credits. If your ICHRA is considered affordable, you generally can’t also claim the ACA premium tax credit. If it’s unaffordable, you may be able to decline it and take the credit instead. A tax professional can help you decide.
• Tax treatment. Qualifying reimbursements are generally not taxable income for you.
• Keep your records. Save proof of coverage, premium payments, and any receipts.
• Timing matters. Expenses before your plan start date, or while you aren’t enrolled in qualifying coverage, aren’t reimbursable.

Frequently asked questions

Do I have to choose a specific plan?
No. You can choose any individual plan that meets your employer’s ICHRA requirements.

Can I use my ICHRA if I’m covered under my spouse’s employer plan?
No. ICHRA reimbursements require individual coverage or Medicare. A spouse’s group plan doesn’t qualify.

What happens if I leave my job?
Reimbursements generally end when your employment ends. Your individual plan is yours to keep, but you’ll need to pay for it yourself or find other coverage. Contact your administrator for details.

Where do I find my allowance?
Log in to BEN360 and go to dashboard, or check your ICHRA notice.

Need help?

Contact 651-358-2987 · Mon–Fri, 9 AM–5 PM CT or email support@ben-360.com.

This article is for general information only and isn’t tax, legal, or financial advice. Rules and limits can change, so confirm details with a qualified advisor or your plan documents.