How Do Employees Use an ICHRA to Buy Their Own Plan?
Employees use an ICHRA (Individual Coverage Health Reimbursement Arrangement) by enrolling in an individual health insurance plan on the ACA Marketplace or directly through a carrier, then receiving tax-free monthly reimbursements from their employer to help cover the premium and eligible medical expenses. Unlike traditional group health plans, an ICHRA gives employees the freedom to choose a plan that fits their personal health needs and budget, while employers set a fixed contribution amount they are comfortable spending.
If your employer has offered you an ICHRA, you might be wondering how the process works from your side. The good news: it is straightforward, and you have options.
What Is an ICHRA and How Does It Work for Employees?
An ICHRA is a health reimbursement arrangement that employers can offer to their workers. The employer decides how much to contribute each month (say, $400 or $600), and that money goes toward reimbursing you for the cost of an individual health insurance plan you select yourself.
Here is the key difference from a traditional group plan: you are not locked into whatever the company chose. You pick your own plan — from any carrier that sells individual coverage in your state — and your employer reimburses you for part or all of the cost, up to their set amount.
According to the IRS, ICHRAs are available to employees of any size employer, including small businesses that may not have been able to afford group health coverage in the past.
Step-by-Step: How to Use Your ICHRA
1. Your Employer Sets the Contribution
Your employer decides on a monthly ICHRA allowance. This amount is the same for all employees within a defined class (for example, all full-time employees). The employer can set different amounts for different employee classes, but everyone in your class gets the same offer.
2. You Shop for an Individual Health Plan
Using your ICHRA allowance, you shop for an individual health insurance plan that meets your needs. You can:
- Browse plans on the ACA Marketplace at healthcare.gov (or your state exchange if your state has one)
- Work directly with an insurance advisor like Trek Insurance Solutions to compare options
- Choose a plan from any carrier licensed in your state
3. You Enroll in Your Chosen Plan
Once you find a plan that fits, you enroll directly — either through the Marketplace or through the carrier. You are now covered by your own individual health plan.
4. Your Employer Reimburses You
After you are enrolled, your employer reimburses you for the premium (and in many cases, other eligible medical expenses) up to their set ICHRA amount. The reimbursement is tax-free to you as an employee, and tax-deductible for the employer.
5. You Can Use Any Remaining Funds
If your employer contributes $600 per month and your plan costs $550, you may have $50 left over for other eligible expenses like prescription copays, dental, or vision — depending on how the ICHRA is set up.
Can Employees Keep Their Existing Plan?
Yes. If you already have individual health coverage — perhaps through a spouse, the Marketplace, or directly through a carrier — you can keep it and still receive ICHRA reimbursements. The ICHRA simply adds a tax-free benefit to help you pay for the coverage you already have.
If you prefer your current plan, you do not have to switch. Your employer may require you to attest that you have qualifying coverage, but the choice of plan remains yours.
What If the ICHRA Amount Does Not Cover My Full Premium?
If your employer contributes less than the total cost of your chosen plan, you are responsible for paying the difference. For example, if your employer contributes $500 per month and your plan costs $700, you would pay the remaining $200 out of pocket.
This is one reason why shopping around matters. An insurance advisor can help you find plans that align with both your health needs and your budget, including plans where the ICHRA contribution covers most or all of the premium.
Can Employees Opt Out of the ICHRA?
Yes. Employees are not required to accept an ICHRA offer. If you decline the ICHRA, you are free to find coverage on your own or through another source (such as a spouse’s employer plan). You simply will not receive the employer contribution.
Why ICHRAs Are Growing in 2026
ICHRAs have become increasingly popular because they solve a real problem: employers want to help employees with health coverage, but group plans are expensive and inflexible. With an ICHRA, employers set a predictable budget, and employees get to choose what works for them.
For small businesses especially, ICHRAs can be a game-changer. A small business that could not afford a traditional group plan can now offer employees meaningful health benefits without the administrative complexity or cost of group coverage.
How Trek Insurance Solutions Can Help
At Trek Insurance Solutions, we help both employers and employees navigate the ICHRA process. For employers, we design ICHRA programs that attract and retain talent while keeping costs predictable. For employees, we compare individual health plans to find the right fit for your needs and budget.
We are licensed in 19 states: NE, SD, IA, IL, WI, TX, TN, AZ, AR, IN, OH, MI, VA, KS, MO, NM, SC, GA, FL.
Ready to learn more? Visit trekis.net/services/employee-benefits or call us at 888-960-0442 to speak with a licensed advisor today.
888-960-0442 · trekis.net · Licensed in 19 states.