ICHRA vs. a group health plan

A group health plan buys one network for your whole staff. An ICHRA gives each person a set amount of money to buy their own individual plan. You cannot offer both to the same class of employees. The right answer depends on how much choice your people need.

The choice in one line

A group health plan is a plan you buy. An ICHRA is money you give.

That is the whole difference, and everything else follows from it. With a group plan, you pick the carrier, the network and the benefits. Every employee gets what you picked. With an ICHRA, you pick an amount. Each employee buys their own individual plan and you reimburse them, tax free.

ICHRA stands for individual coverage health reimbursement arrangement. The rules took effect on 1 January 2020. They came from a joint rule written by the Treasury, Labor and Health and Human Services departments (CMS).

What a group health plan gives you

You are the buyer. You negotiate, or your broker does. You choose one network, or a small set of them, and your staff live inside it.

That has real value. One network means one set of rules to explain. It also means the person doing the network due diligence is you, once, for everyone. If your top surgeon is in the network, they are in the network for all 60 of your people.

The cost sits with you too. When claims rise, your renewal rises. You feel it as one number.

What an ICHRA gives you

You are the funder, not the buyer. You set an allowance. Your employee shops the individual market and picks a plan. You reimburse premiums and, if you choose, other medical costs.

Two conditions matter. The employee must actually be enrolled in individual health insurance or in Medicare for every month they are covered by the ICHRA. Short-term plans and dental-only plans do not count (HealthCare.gov).

Your cost is the allowance. It does not move when claims move. That is the appeal, and it is also the trade: you have swapped a variable cost for a fixed one, and handed the plan choice to your staff.

We wrote separately about what an ICHRA allowance pays for.

Side by side

The rule that stops you offering both

You cannot let the same group of employees choose between the two. That is not a style preference. It is written into the rule.

The federal register text explains why. Letting people choose would allow an employer to steer sicker staff out of the group plan and into the individual market. So the rule blocks the choice at the class level (Federal Register).

You may still run both at once, as long as they go to different classes. Full-time staff on a group plan and part-time staff on an ICHRA is allowed (HealthCare.gov).

Classes, and the minimum size rule

The rule names the classes you may use. You cannot invent your own. Permitted classes include full-time, part-time, seasonal, salaried, non-salaried, staff under a collective bargaining agreement, staff still in a waiting period, non-resident aliens with no US income, and staff in the same rating area.

If you offer a group plan to one class and an ICHRA to another, a minimum size applies to the ICHRA class.

Those minimums fall away if you offer no group plan at all (HealthCare.gov).

What "affordable" means here

This word has a specific meaning, and it decides something your staff care about.

An ICHRA offer is affordable if the employee's monthly cost for the lowest-cost silver plan available to them, after your reimbursement, is under a set share of their income. For 2026 plans that share is 9.96% of one twelfth of household income (HealthCare.gov).

If your offer is affordable, the employee cannot claim the premium tax credit, even if they turn the ICHRA down. If it is not affordable, they may choose one or the other, but never both (IRS).

You also owe a written notice, generally 90 days before each plan year starts, and every employee must get a yearly chance to decline (HealthCare.gov).

The part employers underestimate

Under a group plan, one person checks the network. Under an ICHRA, everyone does.

That is the quiet cost of the switch. Your employee now has to work out whether their own doctor takes the plan they are about to buy. The tool they will use for that is the insurer's online provider directory.

Those directories are not reliable.

What we find in directory data

We keep our own copy of the federal provider registry. We check directory rows against it and record the date. Here is our most recent run, computed on 1 August 2026 over 1,909,677 directory rows.

The figure that should give an employer pause is the last address row. Nearly two thirds of the addresses we checked did not line up with the federal record.

What that number does not prove

An unmatched address is not proof of a wrong address.

Providers work at more than one location. A registry holds a mailing address that may not be the clinic. Formatting differs between systems. Any of those produce a mismatch without anyone being wrong.

So read it as a measure of how much a person cannot confirm from public data, not as an error rate. That is still the point. Your employee is being asked to make a plan choice on data that mostly cannot be corroborated.

We hold the dated record of what these files said, which is what our continuity record is for, and the fuller method sits in Ghost networks by the numbers. We also wrote a reader's guide to the problem in your plan's doctor list can be wrong.

Which one fits your company

An ICHRA tends to fit when your staff are spread across many places, when their needs differ a lot, or when a predictable benefits cost matters more than a single shared network.

A group plan tends to fit when your staff are concentrated in one area, when a specific hospital system matters to them, or when you do not want each person doing their own network research.

Company size is not the deciding factor. Almost any employer with at least one employee who is not a self-employed owner or that owner's spouse may offer an ICHRA (HealthCare.gov).

What to do before you switch

Do these things first, in this order.

1. List the doctors and hospitals your staff actually use. Ask them.
2. Check which individual-market plans in your rating area include those providers.
3. Confirm those answers by phone with the practice, not only from the directory.
4. Model your allowance against the lowest-cost silver plan in each rating area you employ people in.
5. Work out whether that allowance lands as affordable, and decide whether you want it to.
6. Write the notice, and give people the full 90 days.

Step 3 is the one that gets skipped. It is also the one that prevents a bad first year.

If you want help doing this properly, that is the work we do for employers.

Questions people ask

Can I offer my staff a choice between an ICHRA and our group plan?

Not within the same class of employees. The rule blocks that choice on purpose, to stop employers steering sicker staff into the individual market. You may offer a group plan to one class and an ICHRA to another.

Does an ICHRA have a maximum contribution?

No. The rule sets no annual ceiling on what you may reimburse through an ICHRA. You choose the amount, and you must offer it on the same terms across a class, with variation allowed only by age and dependent count.

Will my employees lose their premium tax credit?

If your offer counts as affordable, yes, and that holds even if they decline it. If your offer is not affordable, they may pick either the ICHRA or the credit, but never both at the same time.

Is an ICHRA cheaper than a group plan?

It is more predictable, which is not the same thing. Your cost becomes the allowance you set rather than a renewal that moves with claims. Whether that ends up cheaper depends entirely on the allowance you choose.

How reliable are the provider directories my staff will rely on?

Less reliable than most people assume. In our run of 1 August 2026, 63.1% of the 1,904,271 directory addresses we checked did not match the federal registry, and 5,337 listed providers were already deactivated in it.