An individual coverage HRA flips the traditional model. Instead of buying one group plan, you give each employee a tax-free monthly allowance, they pick their own plan on the individual market, and you reimburse premiums up to the allowance. Employers of any size have been able to do this since 2020.
Why employers like it:
- Fixed, budgetable cost. Renewal increases on the individual market are the employee's plan choice, not your bill.
- No participation minimums, which helps groups that struggle to get enough employees enrolled.
- Works across states, where one group plan would have weak networks somewhere.
- Classes. You can set different allowances by full-time vs part-time, salaried vs hourly, or location, and even offer a group plan to one class and an ICHRA to another.
The trade-offs are real. Individual market plans often have narrower networks than group PPOs, and in some counties there are only one or two carriers. Older employees can face much higher premiums than younger ones, which makes allowance design important. Employees need real help picking a plan, or the benefit feels like a pay cut. And the ACA affordability test has to be checked for each class.
One note on CHOICE arrangements: lawmakers have pushed to write ICHRA into statute under that name, but as of October 2026 it still rests on regulation. I plan around the rules that exist today.
Questions to ask
- What would our allowance by class need to be to match current employee costs?
- How many carriers and what networks are available in the counties where our people live?
- Who helps employees choose and enroll, and what does that cost?