- 01
Employer sets the benefit
Establish eligibility and reimbursement amounts under the ICHRA rules.
- 02
Employee chooses coverage
Eligible employees enroll in qualifying individual coverage or eligible Medicare coverage.
- 03
Eligible expenses are reimbursed
Coverage and expenses are substantiated before reimbursement, up to the plan allowance.
One arrangement, two decisions
The employer decides the benefit’s eligible population, contribution structure, covered expenses, and administration. The employee selects qualifying coverage and follows the arrangement’s enrollment and substantiation process. Reimbursements are limited by the written terms; an allowance is not unrestricted cash wages.
Why you may also see “CHOICE Arrangement”
CMS and HealthCare.gov currently use CHOICE Arrangement for what was previously called an individual coverage HRA. We use ICHRA throughout this site because employers may encounter both terms. A change in consumer-facing terminology should not be taken as proof that every underlying legal rule has changed.
MONTRIDGE WEBINAR · 3:57Understanding ICHRA
WATCH & EXPLORE · 3:57
Group Health Insurance Alternative for Employers: ICHRA Explained
Start with the two decisions behind ICHRA: how the employer funds the benefit and how employees choose qualifying coverage.
Schedule an ICHRA Consultation ↗How the process fits together
- Employer establishes a compliant written arrangement and communicates the offer.
- Employee evaluates the offer, including its effect on any Marketplace subsidy.
- Employee obtains qualifying individual coverage or qualifying Medicare coverage.
- Coverage and eligible expenses are substantiated under the plan’s procedures.
- Employer-funded reimbursements are made within the plan’s limits.
Coverage must qualify
Qualifying coverage can include individual major medical insurance purchased on or off the Marketplace, Medicare Parts A and B together, or Medicare Advantage. A short-term policy, health-sharing membership, or dental-only or vision-only coverage does not replace the required qualifying coverage.
Who can participate?
Employers of different sizes can consider ICHRA. Participation still depends on employee eligibility, class design, and qualifying coverage. Independent contractors and self-employed owners are not automatically eligible employees. Owner and family participation require entity-specific tax review.
Questions to settle first
- What expenses will this arrangement reimburse?
- How will coverage be substantiated and reimbursements processed?
- Who will explain enrollment and subsidy implications to employees?
- How will new hires, departures, and annual renewals be handled?
Sources & further reading
Research checked October 27, 2026. General education; no employer-specific legal or tax review is represented.