ICHRA for Ohio Employers

An Individual Coverage Health Reimbursement Arrangement, or ICHRA, allows an employer to reimburse employees for qualifying individual health insurance instead of offering one traditional group health plan.

The employer sets the reimbursement amount. Employees choose individual coverage available where they live and receive reimbursements up to the amount provided by the employer.

Individual coverage is not medically underwritten, but an ICHRA is not automatically simpler or less expensive than group insurance.

The decision depends on factors such as:

• Individual-market plans and provider networks
• Employer and employee costs
• Employee ages and household coverage needs
• ICHRA affordability and Marketplace subsidies
• Employee classes and class-size rules
• Enrollment and reimbursement administration
• How the arrangement will be reviewed each year

This page explains how an ICHRA works, when it may fit, when it may not fit, and how it fits within the broader small business health insurance options available in Ohio.

What Is an ICHRA?

ICHRA stands for Individual Coverage Health Reimbursement Arrangement. It is an employer-sponsored health benefit that reimburses eligible employees for qualifying individual health insurance.

Instead of selecting one group plan for the workforce, the employer establishes a written reimbursement arrangement and determines how much money to make available each month.

Employees then select their own individual coverage, generally through the Health Insurance Marketplace or directly from an insurance company.

An ICHRA may reimburse:

• Qualifying individual health insurance premiums
• Medicare premiums for eligible participants
• Additional qualified medical expenses if the employer designs the arrangement to include them

Many employers choose a premium-only structure because it is easier to explain and administer. Other employers include additional qualified medical expenses when that broader reimbursement structure fits their goals.

Reimbursements are generally tax-advantaged when the arrangement is properly established and administered.

HealthCare.gov provides a federal overview of Individual Coverage HRAs for employers.

How an ICHRA Works

An ICHRA replaces the traditional “one group plan for everyone” structure with a defined employer contribution.

The basic process is:

1. The employer establishes the ICHRA and determines which employees are eligible.
2. The employer sets the monthly reimbursement amount.
3. Employees select qualifying individual coverage available in their location.
4. Employees provide required proof of coverage through the ICHRA’s substantiation process.
5. The arrangement reimburses eligible premiums or expenses up to the amount available.

The employer does not reimburse more than the amount made available under the arrangement. Unused amounts may remain available or expire depending on the employer’s plan design.

Employees Must Maintain Qualifying Coverage

An employee must maintain qualifying individual health insurance or qualifying Medicare coverage for each month in which the employee receives an ICHRA reimbursement.

Qualifying coverage generally includes:

• Individual major-medical coverage purchased through the Marketplace
• Individual major-medical coverage purchased directly from an insurance company
• Medicare Parts A and B
• Medicare Advantage

Short-term medical plans and limited-benefit coverage such as stand-alone dental or vision insurance do not satisfy the individual-coverage requirement.

Individual Coverage Is Not Medically Underwritten

ACA-compliant individual coverage is not medically underwritten. An employee cannot be declined or charged more because of health conditions, claims history, or pre-existing conditions.

Evaluating an ICHRA generally requires employee age, location, household coverage needs, and available-plan information. It does not require employee medical questionnaires.

When an ICHRA May Fit

An ICHRA may deserve consideration when the employer wants a defined reimbursement budget and the individual market provides workable options for the employees involved.

It may fit when:

• The employer wants to control the amount made available for health benefits.
• The individual-market plans, networks, and benefits fit the workforce.
• Traditional group participation requirements create difficulty.
• Employees value having a choice among individual plans.
• The employer wants to offer benefits to an eligible employee class that is not covered by its group plan.
• The employer is prepared to support employees through individual enrollment and annual plan selection.
• The employer understands how its contribution affects employee costs and Marketplace subsidy eligibility.
• The administrative platform can handle notices, substantiation, and reimbursements consistently.

These circumstances make ICHRA worth evaluating. They do not establish that it will automatically cost less or produce a stronger benefit for every employee.

When an ICHRA May Not Fit

An ICHRA may not be the strongest fit when:

• The individual-market plans or provider networks do not fit important employee locations.
• Employee premiums remain high after the employer reimbursement.
• A strong group plan offers better benefits, network access, or overall value.
• The employer wants employees to have a consistent plan and cost-sharing structure.
• Employees are unlikely to be comfortable selecting and maintaining individual coverage.
• The employer does not want the notice, substantiation, affordability, and reimbursement responsibilities.
• The proposed contribution would create significant employee cost differences or subsidy complications.
• The employer wants to avoid the annual review of individual-market options and employee affordability.

Availability and suitability are different questions. An employer may be allowed to establish an ICHRA without it being the strongest practical option for the workforce.

Why Geographic Market Fit Matters

ICHRA results depend on the individual insurance market available where each employee lives.

A geographically concentrated workforce may be a strong fit when the local individual market offers competitive plans, useful provider networks, and workable employee costs.

A distributed workforce may also fit when acceptable options exist in each employee’s location.

The concern is not whether employees are concentrated or dispersed. The concern is whether the individual market works across all of the locations that matter.

An employer should review:

• Available carriers and plans by employee location
• Provider and hospital networks
• Plan benefits and cost-sharing structures
• Employee premiums after the proposed reimbursement
• Differences among single, spouse, child, and family coverage needs
• Whether one or more employees would face materially weaker choices

A concentrated group in one Ohio county may be an excellent ICHRA candidate when the individual market provides a strong local carrier and network match. A distributed group may also work well, but each location must be evaluated rather than assumed to be adequate.

How ICHRA Employee Classes Work

An employer may offer an ICHRA to all eligible employees or use certain federally permitted employee classes.

Permitted classes may include:

• Full-time employees
• Part-time employees
• Salaried employees
• Hourly employees
• Seasonal employees
• Employees in permitted geographic areas
• Employees covered by a collective bargaining agreement
• Temporary employees of a staffing firm
• Employees who have not completed a permitted waiting period
• Certain nonresident employees without United States-based income

The employer generally cannot offer an employee a choice between an ICHRA and a traditional group health plan. Different benefits may be offered to different permitted classes, but employees within the same class must generally be treated consistently.

Minimum Class-Size Rules

Minimum class-size rules can apply when an employer offers a traditional group plan to one class and an ICHRA to another using certain class distinctions.

For an employer with fewer than 100 employees, the applicable minimum class size is generally 10 employees when the minimum class-size rule applies.

These minimums generally do not apply when the employer offers only an ICHRA and does not offer a traditional group plan to another employee class.

This distinction is especially important for employers in the 2–50 employee market. A small employer should not assume it can divide a five-person or eight-person workforce between group coverage and an ICHRA using any class structure it chooses.

Contribution Differences Within a Class

ICHRA amounts must generally be offered on the same terms within an employee class.

Federal rules allow certain contribution differences based on age and dependent count. Any variation should be established within the permitted structure and documented in the plan.

Employer Contributions, Affordability, and Marketplace Subsidies

The employer decides how much to make available through the ICHRA. Federal rules do not impose one standard contribution amount for every employer.

The employer’s reimbursement obligation is capped at the amount made available under the arrangement. The employer may also incur platform, implementation, administration, and advisory costs.

The contribution affects more than the employer’s budget. It also affects:

• How much employees must pay for coverage
• Whether the ICHRA is considered affordable
• Whether employees may qualify for Marketplace premium tax credits
• Whether an applicable large employer satisfies employer-mandate requirements

When the ICHRA Is Affordable

An employee offered an affordable ICHRA is generally not eligible for a Marketplace premium tax credit, even if the employee declines the ICHRA.

When the ICHRA Is Unaffordable

If the ICHRA is not affordable, the employee may opt out and potentially qualify for a Marketplace premium tax credit if the employee meets the other eligibility requirements.

The employee generally cannot receive an ICHRA reimbursement and a Marketplace premium tax credit for the same coverage period.

How Affordability Is Evaluated

Affordability generally considers:

• The premium for the applicable lowest-cost self-only silver plan
• The employee’s location
• The monthly amount made available through the ICHRA
• The annually adjusted federal affordability percentage

The affordability percentage changes annually. Employers should use current federal guidance rather than relying on a percentage from a prior year.

Applicable large employers should pay particular attention to affordability because it can affect compliance with the ACA employer shared-responsibility requirements.

Employer Budget Predictability vs. Employee Cost

An ICHRA can make the employer’s maximum reimbursement budget more predictable. It does not eliminate health insurance cost increases.

Individual-market premiums can still change each year. When premiums increase, the employer can:

• Increase the ICHRA contribution
• Keep the contribution unchanged
• Adjust the benefit differently for future plan years within applicable rules

If the employer keeps its contribution unchanged while individual premiums rise, employees generally absorb more of the increase.

Employers comparing this approach may also benefit from reviewing the factors that affect small business health insurance costs in Ohio.

What Changes for the Employer and Employees?

For the Employer

The employer no longer selects one group insurance policy for everyone. Instead, the employer:

• Establishes the written ICHRA plan
• Defines eligible employee classes
• Determines the reimbursement amount
• Provides required employee notices
• Arranges for coverage substantiation
• Processes or funds approved reimbursements
• Reviews affordability when relevant
• Reevaluates contribution levels and market conditions each year

The administrative work does not disappear. It changes.

The employer may spend less time selecting one carrier plan and reacting to a traditional group renewal. The employer and administrator must instead manage employee eligibility, individual-coverage verification, reimbursements, notices, affordability, and annual employee enrollment support.

A capable ICHRA administrator can make these responsibilities more manageable and consistent.

For Employees

Employees select and maintain their own qualifying individual coverage. They must evaluate:

• Monthly premiums
• Provider and hospital networks
• Plan benefits
• Deductibles and out-of-pocket limits
• Household coverage needs
• The amount remaining after the employer reimbursement

Employees may have different carriers, networks, plan designs, and net premiums depending on their location, age, household needs, and plan selection.

This can provide meaningful choice, but it also places more responsibility on employees to enroll, maintain coverage, pay premiums when required, and reconsider their plan during each annual enrollment period.

Enrollment Timing, Notices, and Coverage Verification

Special Enrollment Period

A new ICHRA offer generally creates a Special Enrollment Period that allows eligible employees to obtain qualifying individual coverage outside the normal individual-market open enrollment period.

The employer should coordinate the ICHRA start date with the time employees need to review and enroll in individual plans.

A January 1 effective date often aligns naturally with individual-market open enrollment and annual deductible resets. Other effective dates may also work, but implementation timing should be planned carefully.

Employee Notice

Current employees generally must receive the required ICHRA notice at least 90 days before the beginning of the plan year.

Employees who become eligible later should receive the notice when they become eligible, subject to the applicable timing rules.

The notice explains important issues including:

• The ICHRA amount
• Eligibility
• The individual-coverage requirement
• Marketplace premium tax-credit consequences
• How employees report the ICHRA offer to the Marketplace

Our guide to health insurance notices for Ohio employers provides broader information about employer notice responsibilities.

Coverage Substantiation

The ICHRA must use reasonable procedures to verify that participating employees and covered dependents maintain qualifying individual coverage or Medicare for each month in which expenses are reimbursed.

Verification generally occurs:

• Before participation begins
• On an ongoing basis when reimbursement requests are made

The employer should use a properly administered substantiation process rather than informally collecting personal insurance documents from employees.

How Employees Pay Individual Premiums

Employees may purchase qualifying coverage through the Marketplace or directly from an insurer.

If the employer establishes a permitted pre-tax payroll arrangement for the unreimbursed portion of individual premiums, the individual coverage generally must be purchased outside the Marketplace.

Employers should coordinate any payroll deduction structure with the ICHRA administrator and qualified tax or benefits advisers.

How to Evaluate an ICHRA Using Actual Employee Data

ICHRA evaluation does not require employee medical questionnaires. ACA-compliant individual coverage is not medically underwritten.

A practical review generally uses information such as:

• Employee home ZIP codes or counties
• Employee ages
• Dependents expected to need coverage
• Current employee enrollment
• Current employer and employee costs
• The proposed employer reimbursement
• Available individual plans and provider networks
• Employee affordability and subsidy considerations

The analysis should show more than the employer’s total budget. It should also show what individual employees may experience after the employer contribution.

Important questions include:

• What plans are available in each employee’s location?
• What will each employee pay after the reimbursement?
• Are important doctors, hospitals, and benefits available?
• Would some employees receive a substantially stronger or weaker result than others?
• How does the proposed contribution affect affordability and subsidies?
• How does the ICHRA compare with the group options realistically available?

Where a Prescreen Fits

An ICHRA itself does not require medical underwriting.

If the employer also wants to compare an ICHRA with underwriting-sensitive Ohio MEWA or level-funded options, a confidential health insurance prescreen may be needed to obtain realistic group-plan pricing.

In practical terms:

• ICHRA analysis generally uses employee age, location, household, and coverage information.
• Underwritten MEWA and level-funded analysis may require a separate confidential prescreen.
• ACA small-group coverage can be reviewed without medical underwriting.

The goal is to compare realistic options rather than assume that either individual or group coverage will automatically produce the better result.

Annual Review Still Matters

An ICHRA does not have a traditional carrier renewal for one employer-sponsored group policy, but it still requires annual review.

The employer should review:

• Individual-market premiums
• Carrier and network changes
• The ICHRA contribution
• Employee affordability
• Workforce locations and classes
• Employee enrollment experience
• Group-plan alternatives

Many employers incorporate this review into a broader small-business health insurance renewal system.

Comparing ICHRA With Traditional Group Coverage

An ICHRA uses a defined employer reimbursement and individual insurance selected by employees. A traditional group plan uses employer-selected group coverage and a shared contribution structure.

The practical decision involves more than employer cost. It also includes:

• Employee premiums
• Provider networks
• Plan benefits
• Marketplace subsidy eligibility
• Employer administration
• Employee enrollment support
• Consistency across the workforce

Our guide to ICHRA vs. Group Health Insurance in Ohio provides a side-by-side decision framework.

Frequently Asked Questions

Are ICHRAs available to employers of any size?

Yes. Employers of different sizes may establish an ICHRA, subject to the federal rules governing plan design, employee classes, notices, substantiation, affordability, and other applicable requirements.

Are individual plans purchased through an ICHRA medically underwritten?

No. ACA-compliant individual health insurance is not medically underwritten. Employees cannot be declined or charged more because of health conditions, claims history, or pre-existing conditions.

Do employees have to buy their own insurance?

Yes. Employees must enroll in qualifying individual health insurance or qualifying Medicare coverage to receive reimbursements.

The employer provides the defined reimbursement but does not choose one individual plan for all employees.

Can an employer offer both an ICHRA and a group plan?

An employer may offer a group plan to one permitted employee class and an ICHRA to another. It generally cannot offer employees within the same class a choice between the two.

Minimum class-size rules may apply. For employers with fewer than 100 employees, the applicable minimum is generally 10 employees when those rules apply.

Can employees receiving an ICHRA qualify for Marketplace subsidies?

Sometimes.

• If the ICHRA is affordable, the employee is generally not eligible for a Marketplace premium tax credit.
• If the ICHRA is unaffordable, the employee may opt out and potentially qualify for a premium tax credit if otherwise eligible.

An employee generally cannot receive both an ICHRA reimbursement and a Marketplace premium tax credit for the same coverage period.

What expenses can an ICHRA reimburse?

An ICHRA can reimburse qualifying individual insurance premiums. Depending on the employer’s plan design, it may also reimburse additional qualified medical expenses.

Not every ICHRA reimburses the same categories of expenses. The written plan document determines what is eligible.

Can an ICHRA be offered to part-time employees?

Yes. Part-time employees are a permitted ICHRA class.

If the employer offers a traditional group plan to full-time employees and an ICHRA to part-time employees, minimum class-size rules may apply depending on the employer’s size and plan structure.

Can an ICHRA work for a one-employee business?

It may work when the business has one bona fide common-law employee who is eligible to participate.

An owner-only business cannot automatically establish an ICHRA solely to reimburse the owner tax-free. Sole proprietors, partners, and more-than-2% S corporation shareholders are generally treated as self-employed rather than employees for HRA tax purposes.

One-person, owner-and-spouse, and family-business situations should be reviewed based on the business entity and employment relationships involved.

Will an ICHRA always cost less than a group plan?

No. An ICHRA may produce a stronger result for some employers, while ACA, MEWA, or level-funded coverage may provide better benefits, network access, employee costs, or overall value for others.

The result should be evaluated using actual employee and market information.

Does an employer need a medical prescreen to evaluate an ICHRA?

No. The ICHRA and the individual plans employees purchase are not medically underwritten.

A prescreen may be useful when the employer also wants to compare underwriting-sensitive MEWA or level-funded options.

Evaluating an ICHRA for an Ohio Employer

McCarthy Stevenot Agency is an independent Ohio health insurance agency founded in 1991. We work primarily with Ohio employers in the 2–50 employee market and evaluate ACA, Ohio MEWA, level-funded, and ICHRA approaches when appropriate.

An ICHRA review can begin with employee ages, locations, coverage needs, current costs, and the contribution the employer is considering. When underwritten group alternatives may also be relevant, a no-cost prescreen can help complete the comparison.

Call 513-891-9888 or contact McCarthy Stevenot Agency to discuss the workforce and determine which review process makes sense.

Related Resources

Small Business Health Insurance Options in Ohio
Compare the primary coverage and funding approaches available to Ohio small employers.

ICHRA vs. Group Health Insurance in Ohio
Compare a defined-contribution reimbursement arrangement with employer-selected group coverage.

Small Business Health Insurance Cost in Ohio
Understand the factors affecting employer and employee costs under different coverage structures.

Health Insurance Prescreen for Ohio Employers
Learn how underwriting-sensitive group options can be tested before comparing them with an ICHRA.

Disclaimer: This page is for general educational purposes only and is not legal, tax, accounting, benefits, or compliance advice. ICHRA design, employee classes, contribution rules, affordability standards, subsidy eligibility, notice requirements, substantiation procedures, individual-plan availability, networks, premiums, and tax treatment can change and depend on employer-specific facts. Employers should review current federal guidance, plan documents, administrator procedures, business ownership, employee classifications, and applicable tax and benefits requirements with qualified advisers before implementation or renewal.