What is an ICHRA and how does it work?

An ICHRA is a type of health benefit that lets employers give a fixed, pre-tax amount to their employees to pay for their health insurance premiums (AKA health benefit). The acronym stands for Individual Coverage Health Reimbursement Arrangement — a mouthful that takes longer to say than it does to explain.

StretchDollar’s ICHRA works like this:

  • The employer sets aside money each month (the benefit) to give to their employees to help with their health insurance premiums.
  • The employee then shops for a health insurance plan that fits their needs, and uses the monthly benefit to help cover the cost.

You might be wondering, why haven't I heard of ICHRAs before? The short answer is that it is relatively new. In 2020, federal legislation created ICHRAs to broaden the appeal for HRAs (health reimbursement arrangements). The existing HRAs didn't catch on because they were limited by the types of businesses that could offer them and the amount an employer could give to their team. ICHRAs don't have those limitations — any size business can offer any size benefit to employees for their health insurance expenses.

StretchDollar focuses on small businesses, leveraging ICHRA to create the simplest and most affordable health benefit option around.

If you want to dig into the nitty-gritty details, check out the IRS announcement about ICHRA. Or, read our Not-So-Boring Guide to ICHRAs.

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