ICHRA was created through federal regulations finalized in 2019 after a 2017 Executive Order directed federal agencies to expand employer-funded health reimbursement arrangements, and it became available for employers starting in 2020.
Why ICHRA was created
ICHRA was designed to expand employer health benefit flexibility
Before ICHRA existed:
Employers were generally restricted from reimbursing employees for individual health insurance premiums
HRAs were mostly tied to employer group health plans
Small employers had limited options to fund individual coverage
The goal of ICHRA was to:
Increase employee choice in health insurance
Allow employers to move away from traditional group plans
Expand tax-advantaged reimbursement options
Improve flexibility for businesses of all sizes
Federal origin of ICHRA
ICHRA was created through a joint federal rulemaking process
ICHRA was established by:
U.S. Department of the Treasury
U.S. Department of Labor (DOL)
U.S. Department of Health and Human Services (HHS)
It was formalized through federal regulations finalized in 2019.
For a more in-depth explanation of where and how the new HRA originated, read our in-depth ICHRA Guide.
How ICHRA evolved from earlier HRAs
ICHRA is an expansion of prior HRA structures
ICHRA builds on:
Traditional HRAs (tied to group insurance)
QSEHRA (limited small-employer version)
Key differences introduced by ICHRA:
Available to employers of any size
No federal contribution cap
Employee classes allowed for benefit design
Individual insurance becomes the primary coverage model
What ICHRA changed in employer health benefits
1. From group plans to individual choice
Before ICHRA:
Employers typically selected one group health plan
Employees had limited or no plan choice
With ICHRA:
Employees choose their own individual insurance plan
Employers provide a defined monthly allowance
2. From fixed insurance plans to defined contributions
ICHRA introduced a new structure:
Employer sets a budgeted allowance
Employees shop for coverage
Employers reimburse verified expenses up to that allowance
3. Expanded employer eligibility
ICHRA can be offered by:
Small employers
Mid-sized employers
Large employers (including those subject to ACA employer mandate)