ICHRA Administrator Comparison

Comparing ICHRA Providers

Individual Coverage Health Reimbursement Arrangements allow employers to set a defined health benefit budget while giving employees the freedom to choose the individual insurance plan that best meets their needs. Employees can then be reimbursed tax-free.

Who We’re Comparing

In this post we compare ICHRA providers that offer online, transparent pricing and market directly to employers. We do not include providers that rely on insurance brokers as their main sales channel, since those platforms typically add a broker fee and do not publish prices.

ICHRA Is a Commodity

An ICHRA is a legal framework governed by the IRS. At its core, every ICHRA works the same way: the employer adopts a plan document, verifies that each employee has qualifying individual coverage, and reimburses employees for eligible expenses. Because the rules are standardized, the key differences among providers come down to how they administer the benefit.

Health Insurance

To be eligible for an ICHRA, employees must have individual coverage health insurance. Since the provider must verify that coverage, the process often includes an opportunity for the provider to sell insurance. All ICHRA providers are licensed insurance brokers, and most platforms function as both administrators and brokers.

Commissions on individual coverage health insurance are lower than those for group coverage, and employees face far more plan choices. Providing high-touch support is easier when employees are choosing between two options rather than thirty. To manage this complexity, platforms automate much of the insurance purchase process. They display available plan options, and employees shop for their insurance directly on the platform.

 ICHRA companies also tend to steer employees toward off-marketplace policies. There are three main reasons. First, employees can deduct their share of the premium tax-free through a cafeteria plan, which is not allowed with marketplace plans (though that may change in the future). Second, commissions on marketplace plans are generally lower. Finally, non-marketplace plans remove the risk of employees misusing premium tax credits, which are confusing for many and not compatible with ICHRAs.

How Employees Receive the Benefit Matters Most

An ICHRA, by definition, is a reimbursement arrangement. Employees submit claims, those claims are approved, and then expenses are reimbursed. The IRS also allows expenses to be paid directly by the ICHRA.

Some providers follow a reimbursement model; these often also offer QSEHRA, which typically covers out-of-pocket costs and requires reimbursement. Providers that focus only on ICHRAs tend to use a pay model instead. In this setup, the employer pays the entire premium upfront—usually through a virtual debit card—and then recovers the employee’s share through payroll. The model a provider chooses has the greatest impact on how an ICHRA is administered.

Eligible Expenses

With an ICHRA, eligible expenses can include both insurance premiums and out-of-pocket medical costs. Employers may choose to narrow eligibility to premiums only.

Platforms that use the direct pay model force this limitation because paying out-of-pocket expenses directly is technically difficult. In practice, this is not a significant restriction. Even among employers using the reimbursement model—where out-of-pocket expenses could be covered—about ninety percent still limit eligibility to premiums only. The reasons are clear: it keeps the ICHRA compatible with FSAs and HSAs and eliminates the need for discrimination testing. For employers that want to cover out-of-pocket costs, a QSEHRA is usually a better fit.

Insurance Options

In the reimbursement model, delivery of the benefit is independent of the purchase of insurance.  Employees have complete flexibility to purchase their own insurance and the ICHRA provider will verify the insurance is eligible. 

The direct pay model is less flexible. The provider attaches a virtual debit card to the policy, which only works if the provider is the broker of record. If the employee buys insurance elsewhere, the provider will not issue a card, creating administrative problems. Because most direct pay providers lack automated reimbursement systems, they cannot easily handle outside purchases. As a result, employees are often directed to purchase insurance through the provider’s system, even though the law does not require it.

Plan Structure

An ICHRA is considered affordable when the employer’s benefit is greater than the difference between the lowest-cost silver plan and 9.02% of the employee’s income. If the ICHRA is affordable, the employee cannot accept premium tax credits. If it is not affordable, the employee may decline the ICHRA and take the credits instead.

Because the direct pay model requires employees to purchase insurance through the provider, employers are asked to set up an affordable ICHRA (which forces employees off the exchange and into the ICHRA provider’s insurance platform).  Although individual coverage is often less expensive than group coverage, employers should still expect to cover a significant share of their employees’ insurance costs.

The reimbursement model offers more flexibility. Employers may set the benefit at any level, and the provider will walk through the affordability calculation with each employee. Employees then decide whether to accept the ICHRA benefit or decline it in favor of premium tax credits.

Administrator Perspective

From an administrative perspective, the reimbursement model is the simplest to manage. The employee submits an expense, the administrator substantiates it, and if reimbursement is automated, the employee is paid. The employer has nothing to manage, which is especially valuable for small companies without dedicated HR staff and for high-turnover industries such as staffing.

The direct pay model is more complex. The employer must pay the full premium upfront and then recover the employee’s share through payroll. Payments made with virtual cards are pulled, not pushed, so the employer cannot control the exact amounts. Instead, employers prefund an account that is reconciled at the end of each month. This setup requires rigidity: if employees purchase insurance outside the provider’s system, they fall into a separate workflow that most providers are not designed—or incentivized—to support. Some platforms use automated ACH to handle payments more flexibly.

Employee Perspective

From the employee’s perspective, there are two main considerations with the reimbursement model.

First, employees must upload proof of their insurance. In practice, many providers already work around this by automating premium payments and then performing a compliance check afterward to confirm that the premiums were paid. Carriers are also becoming more ICHRA-friendly. About forty carriers now report enrollment status directly to brokers, and by next year reimbursement will likely be automated—provided the employee purchases insurance through the ICHRA provider.

Second, employees must pay for their insurance upfront, which creates the potential for timing mismatches. This is largely mitigated by Salusion’s ability to reimburse employees within four business days of a claim, as well as the increasing automation of premium validation. Together, these steps ensure employees are reimbursed well before credit card statements are due.

The direct pay model is undoubtedly easier for employees who purchase insurance through the ICHRA provider. Premiums and employee contributions are automated, and the structure requires employers to run the employee’s share through a cafeteria plan. The tradeoff is that once employees leave the company, they must be diligent about paying their own premiums or risk losing coverage.

QSEHRAs

The main difference between a QSEHRA and an ICHRA is who is eligible to participate. To use an ICHRA, an employee must have individual coverage insurance or Medicare. To use a QSEHRA, the employee only needs to have qualifying insurance. That could be individual coverage or Medicare, but it could also be a spouse’s or parent’s group plan, Medicaid, COBRA, Tricare, or other forms of minimum essential coverage. In short, an ICHRA is best understood as a replacement for group coverage, while a QSEHRA is a more general health benefit that applies to all employees.

Among employers with ten to twenty employees, QSEHRAs and ICHRAs are chosen with about equal frequency. The smaller the company, the more likely it is to choose a QSEHRA, since internal equity tends to matter more. As the company grows, ICHRAs become more attractive, largely because employers can choose to offer the benefit to fewer employees.