An individual coverage HRA, or ICHRA, is a way for an employer to help pay for health insurance without buying one group plan for everyone. Each employee picks a plan on the individual market, and the employer pays them back up to a set amount.
This guide compares an ICHRA with a traditional group plan. It looks at the pros and cons for the employer and for employees.
Where the rules come from
In June 2019, the Treasury Department, the IRS, the Department of Labor, and HHS issued a final rule that created the ICHRA. It was published in the Federal Register at 84 FR 28888 and took effect for plan years starting in 2020. The rules are now at 45 CFR 146.123 and 26 CFR 54.9802-4.
Before the final rule, the IRS issued Notice 2018-88 on how an ICHRA fits with the employer mandate for larger employers. As of October 21, 2026, under current law, these rules still apply.
Pros for the employer
- A set budget. You pick a fixed amount for each class of employees, so you know your top cost each month.
- Different amounts by class. You can give full-time and part-time workers different amounts, for example (see employee classes below).
- Amounts can rise with age and family size. Under the rule, the oldest workers in a class can get up to three times what the youngest get.
- No one plan to pick. Each employee chooses their own plan, so you don't choose one network for everyone.
Cons for the employer
- Rules and paperwork. Under the rule, you must give each eligible employee a written notice at least 90 days before the plan year starts, with some exceptions for new hires and new businesses. You must also check that each person has individual coverage.
- Not both for one class. You can't offer an ICHRA and a traditional group plan to the same class of employees.
- Class size limits. If you offer a group plan to some classes, some ICHRA classes must meet a minimum size. For employers with fewer than 100 employees, that's 10 people.
- Less control over coverage. You don't pick the networks or benefits your workers get.
Pros for employees
- Choice. Each person picks a plan that fits their doctors, drugs, and budget.
- The plan is theirs. The coverage is an individual plan in their own name.
- Tax-free help. Under current law, money paid back from an ICHRA for health insurance is generally not taxed. For tax questions, talk with a tax professional.
- A window to enroll. Under federal rules, getting a new ICHRA offer can open a Special Enrollment Period on the Marketplace (45 CFR 155.420).
Cons for employees
- More work. Each person has to shop for and pick a plan.
- Network limits. As of October 20, 2026, CMS data show most of Florida's 2026 Marketplace medical plans were HMOs, so a PPO may be hard to find. See can you get a PPO on the Marketplace.
- Prices vary by age. An older worker's plan can cost more than the allowance covers.
If the ICHRA is affordable under IRS rules, the employee can't get a premium tax credit, and if it's not, they can opt out and may qualify (26 CFR 1.36B-2). Our guide to ICHRA affordability explains the test.
Employee classes
The rule lets an employer set up classes and treat each class differently. Within a class, the ICHRA must be offered on the same terms to everyone, with some exceptions such as age and family size. Classes in the rule include:
- Full-time and part-time employees
- Salaried and hourly employees
- Employees whose main work site is in the same rating area
- Seasonal employees
- Employees in a union contract
- Employees who haven't met a waiting period
- Some temporary staff and non-resident aliens with no U.S. income
An employer can also combine two or more of these. It must set its classes before the plan year starts.
Florida plan choices vary by county
An ICHRA is only as good as the plans employees can buy. In Florida, that depends on the county.
On October 16, 2026, Florida's Office of Insurance Regulation (OIR) posted proposed 2027 tables. We counted the companies they list as selling on the Marketplace in each of Florida's 67 counties. Hamilton and Monroe counties have 2. The counties with the most have 9. In 24 of 67 counties, there are 2 to 4.
OIR says its proposed 2027 data is not final until federal review, so it may change. Workers in different counties may see very different choices.
ICHRA or a traditional group plan?
A group plan gives everyone the same plan and network, which some teams like. An ICHRA gives each person a set amount and a choice of plans. Neither is right for every business.
If you're also looking at a QSEHRA, see ICHRA vs QSEHRA. For other ways to cover a team, see how to offer health insurance to employees. Some small employers may also look at the small business health care tax credit.