Most employer renewals still start the same way: pull the census, request fully insured quotes, maybe add a level-funded option, and compare. That process leaves out an arrangement that has been legal for every size of employer since January 1, 2020: the individual coverage health reimbursement arrangement, or ICHRA.
For brokers, ICHRA isn't a replacement for group coverage. It's another tool in the kit, and in 2025 it's worth putting in front of more clients than it usually reaches.
A quick refresher on how ICHRA works
The Departments of the Treasury, Labor, and Health and Human Services finalized the ICHRA rules in June 2019, effective for plan years beginning on or after January 1, 2020. The core mechanics:
- The employer sets a monthly allowance. The ICHRA is funded only by the employer. Employees use it to buy their own individual health insurance (on or off the Exchange) or, for eligible employees, Medicare Parts A and B or Part C.
- Reimbursements are tax-free to the employee when the arrangement follows the rules, and the employer deducts what it pays.
- Employees must have qualifying coverage. The plan has to substantiate that each participant is enrolled in individual health insurance or Medicare for every month they receive reimbursements.
- Any size of employer can offer it. Unlike the QSEHRA, ICHRA has no employer-size limit and no statutory cap on the allowance.
- Allowances can vary in limited ways. Within a class of employees, the amount must be offered on the same terms, but it can increase with age (the oldest can receive no more than three times the youngest) and with the number of covered dependents.
- Employers can design by class. Full-time, part-time, salaried, hourly, seasonal, and geographic (rating area) groups are among the permitted classes. An employer can't offer both a traditional group plan and an ICHRA to the same class.
Employees need a written notice, generally at least 90 days before the plan year begins, that explains the allowance and how it affects premium tax credit eligibility. Gaining access to an ICHRA also opens a special enrollment period in the individual market, so mid-year starts are possible.
Why 2025 is a good year to bring it up
Group premiums keep climbing
KFF's 2024 Employer Health Benefits Survey put the average annual premium for family coverage at $25,572, up 7% from the prior year, and the average for single coverage at $8,951. Those numbers land hardest on small employers, who have less negotiating leverage and less room in the budget.
Many small employers offer nothing at all
The same KFF survey found that only about half of small firms (53% of firms with 3 to 199 workers) offered health benefits in 2024. For an employer that has never offered coverage, a fixed-dollar ICHRA can be an easier first step than a group plan with participation requirements and annual rate shocks.
Budget predictability is the headline
With an ICHRA, the employer decides the maximum it will spend per employee each month. Premium increases in the individual market don't automatically flow through to the employer's budget the way a group renewal does. That predictability is often what gets a CFO's attention.
Employees get to choose
Employees pick from the plans available where they live rather than a single network chosen for the whole group. That can be especially useful for employers with staff spread across several states or rating areas, where a single group plan may fit nobody well.
Where ICHRA is not the right answer
A good ICHRA conversation is honest about the trade-offs:
- Individual market quality varies by county. In some areas there are few carriers or narrow networks. Check actual plan availability for the employer's ZIP codes before recommending anything.
- Employees do more of the work. Each person has to shop and enroll. That takes clear communication and, often, enrollment support.
- Premium tax credit interactions matter. An employee offered an ICHRA that is "affordable" under IRS rules can't receive a premium tax credit. If the ICHRA is unaffordable, the employee can opt out and claim the credit instead (if otherwise eligible). The enhanced credits now in place run through the end of 2025 under current law, so the math could shift for 2026.
- Larger employers have more to manage. Applicable large employers (generally 50 or more full-time employees, including equivalents) need an allowance large enough to be considered affordable to avoid employer shared responsibility penalties. We'll walk through that calculation in a future article.
How to bring it into your renewal workflow
You don't need to lead with ICHRA. A practical approach is to include it as one column in the comparison:
- Fully insured renewal as the baseline.
- Level-funded or self-funded alternative, if the group qualifies.
- An ICHRA scenario with an allowance set near the employer's current contribution, so the comparison is apples to apples on cost.
Showing the ICHRA option next to the familiar ones lets the employer see the trade-offs side by side: cost, plan choice, employee experience, and administrative effort.
The bottom line
ICHRA has been available for more than five years and is still unfamiliar to many employers. That's an opening for brokers who understand it. Bringing it up doesn't commit anyone to changing plans, but it does show clients you're looking at every option for their budget and their people.