What is an ICHRA, and why does it matter for small teams?

Most small and mid-size employers assume real health benefits mean a group plan: one insurer, one set of options, one renewal date that never lines up with the business’s actual rhythm. An ICHRA - Individual Coverage Health Reimbursement Arrangement - works differently.

Instead of the employer choosing a single plan for everyone, the employer sets a tax-free contribution. Each employee takes that contribution and picks their own plan on the individual market - the same market anyone can shop, at the same prices.

Why it fits smaller teams. A group plan usually needs a minimum number of enrollees and a fairly uniform contribution across the company. An ICHRA has neither requirement. A five-person studio and a fifty-person restaurant group can both use the same framework, each setting a contribution that matches their own budget.

Why it fits hourly and salaried staff differently. Contributions can vary by employment class - full-time versus part-time, salaried versus hourly - without breaking the plan’s compliance. That flexibility is the whole point.

What it costs the employer. Contributions are tax deductible, same as they would be for a group plan premium. What changes is the administrative weight: no annual re-negotiation with a single insurer, no plan design meetings.

If your team has outgrown “we don’t offer benefits” but isn’t ready for a full group plan, an ICHRA is usually the fastest path between the two.