An ICHRA lets you give employees a monthly allowance to buy their own health coverage instead of managing a group plan. It is a newer option that works especially well for businesses with employees in different states or those who want to offer benefits without the complexity of choosing a one-size-fits-all plan.
This tool shows you how much an ICHRA could cost compared to your current group plan, and whether it makes sense for your situation. Enter your current setup below and you will see a side-by-side comparison with real numbers.
Estimate Individual Coverage HRA costs, compare to group health coverage, and check ACA affordability — by state and employee class
Allowances are linearly interpolated between youngest and oldest. Max ratio: 3:1.
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| Feature | ICHRA | Group Plan | QSEHRA |
|---|---|---|---|
| Employer size | Any size | Any size | <50 employees only |
| Max allowance | No cap | N/A (premium-based) | $6,350/ind, $12,800/fam (2026) |
| Employee classes | 11 classes allowed | Same plan for all | Same for all (age/family only) |
| Employee choice | Any ACA plan | Employer-chosen plan | Any ACA plan |
| Tax treatment | Tax-free reimbursement | Pre-tax premium | Tax-free reimbursement |
| ACA compliance | Satisfies employer mandate | Satisfies employer mandate | Small employer only |
| Cost predictability | 100% fixed budget | Annual renewal risk | 100% fixed budget |
| Admin complexity | Moderate (TPA needed) | Low-moderate | Low |
What is an ICHRA?
An Individual Coverage Health Reimbursement Arrangement (ICHRA) is an employer-funded, tax-advantaged benefit that reimburses employees for individual health coverage premiums and medical expenses. Established by IRS Final Rules published June 20, 2019 (84 FR 28888), ICHRAs allow employers of any size to provide a defined contribution toward employees' individual market coverage.
ICHRA Allowance Calculation:
Base allowance is the monthly amount you set. If age variation is enabled, allowances are linearly interpolated from youngest (age 21) to oldest (age 64) using the formula: allowance = young + (age - 21) / (43) * (old - young). The IRS permits up to a 3:1 oldest-to-youngest ratio, mirroring the ACA age curve.
Family Size Multipliers:
When family variation is enabled, the base allowance is multiplied by the selected factor for each tier. The calculator uses a blended rate assuming 60% single / 25% EE+spouse / 15% family unless overridden by class data.
Marketplace Premium Estimates:
Self-only silver plan premiums are estimated using CMS 2026 marketplace data: national baseline of $496/month for a 40-year-old, adjusted by state cost index and CMS federal age curve factors.
ACA Affordability Test:
Under IRS Notice 2024-55, an ICHRA is "affordable" if the employee's required contribution for the lowest-cost silver plan (self-only) minus the ICHRA allowance is no more than 9.02% of household income divided by 12. If unaffordable, employees may opt out and claim premium tax credits instead.
Group Plan Comparison:
Group plan costs use the entered PEPM multiplied by employer contribution percentage. ICHRA costs are fully predictable since the employer sets a fixed allowance. Group premiums are subject to annual renewal increases (national average: 7-10% per year).
Data Sources: IRS Final Rules on ICHRAs (84 FR 28888, 2019), IRS Notice 2024-55 (ICHRA affordability), CMS 2026 Marketplace Premium Data, KFF 2025 Employer Health Benefits Survey, HRA Council 2025 Benchmark Report.
Get a personalized ICHRA implementation plan with employee class strategy, allowance optimization, and ACA compliance review — from a benefits advisor.