What is an ICHRA? The individual coverage HRA, now called a CHOICE Arrangement

• 800,000firms the Departments projected would offer an ICHRA once employers fully adjusted to the rule
• 3 to 1the most the allowance can vary by age within one class of employees, oldest to youngest
• 9.96%of household income, the 2026 line for whether an ICHRA offer counts as affordable

ICHRA or CHOICE Arrangement: which name is right?

Both. On September 14, 2026, CMS announced that it and the SBA are promoting CHOICE Arrangements, formerly known as individual coverage health reimbursement arrangements. The SBA's small business page uses the same wording. Nothing in those announcements changes the requirements below, which still come from the 2019 regulation, so an employer notice that says ICHRA and one that says CHOICE Arrangement describe the same benefit. I use ICHRA on this page because that is still what most people search for and what most plan documents say.

How an ICHRA works, step by step

• The employer sets the allowance. It picks a monthly dollar amount for each class of employees, for example full time and part time.
• Employees get a written notice. The rule requires a notice at least 90 days before each plan year, or by the date a new employee first becomes eligible. It spells out the amount, the start date and how the offer affects premium tax credits.
• Each employee buys an individual plan. They can buy on HealthCare.gov or a state exchange, or directly from an insurer. Medicare also counts.
• The employer reimburses. The employee shows proof of coverage and expenses, and the employer pays them back tax free, up to the allowance. Depending on how the employer sets it up, that can cover premiums only or premiums plus other medical costs.

The core rules from the federal regulation

• Everyone covered must have individual coverage. The employee and any covered family members must be enrolled in individual health insurance or Medicare for each month they use the ICHRA.
• No choice between group and ICHRA. An employer cannot offer the same employee a choice of the traditional group plan or the ICHRA. It can offer a group plan to one class and an ICHRA to another.
• Same terms within a class. Classes can be based on things like full time or part time status, seasonal work, salaried or non-salaried status, or geographic rating area. Within a class, the allowance can rise with age, up to three times as much for the oldest workers as for the youngest, and with the number of dependents.
• Minimum class sizes in some cases. When an employer mixes a group plan for some workers with an ICHRA for others, a minimum class size rule applies to certain classes. It does not apply when the employer offers only an ICHRA.
• Employees can opt out. The ICHRA must let employees opt out of and waive future reimbursements at least once a year.

The employee side: the affordability test

This is the part that matters most to the person receiving the offer. You cannot use an ICHRA and a premium tax credit at the same time, and whether you can choose the tax credit instead depends on one test.

CMS explains it this way. Take the monthly premium for the lowest cost silver plan for self only coverage where you live. Subtract the monthly amount your ICHRA gives you. If what is left is more than a set percentage of one twelfth of your household income, the offer is unaffordable. For 2026 that percentage is 9.96 percent. It changes every year.

• If the offer is affordable, you are not eligible for a premium tax credit, even if you opt out of the ICHRA. Use the ICHRA.
• If the offer is unaffordable, you can opt out of the ICHRA and use a premium tax credit instead, if you otherwise qualify. You must actually opt out and waive the reimbursements.

A worked illustration, my own math. Take a 40 year old in Hillsborough County, Florida. The lowest cost silver plan there in 2026 was $645.22 a month at full price, per the CMS plan year 2026 data. Say the employer offers $400 a month. The employee's share is $245.22. With household income of $40,000, 9.96 percent of one twelfth of that is about $332. Since $245.22 is less than $332, the offer is affordable, and this employee uses the ICHRA and gets no tax credit. Every county and age gives a different answer, which is why I run it for each person.

A special enrollment window for employees

You do not have to wait for open enrollment to use a new ICHRA. HealthCare.gov lists being offered an individual coverage HRA or a QSEHRA as a qualifying event, and you can use it if the offer came in the past 60 days or you expect it in the next 60 days. That lets an employer start an ICHRA in any month and lets employees line up a plan before the first reimbursement.

ICHRA vs QSEHRA vs a group plan

	ICHRA	QSEHRA	Group plan
Who can offer	Employers of any size	Employers with fewer than 50 full time employees	Any employer that meets insurer rules
2026 dollar limit	None set by the rule	$6,450 self only, $13,100 family	Employer pays its chosen share
What employees buy	Individual plan or Medicare	Their own minimum essential coverage	Nothing, they join the group plan
Affordability test	Lowest cost silver, self only	Second lowest cost silver, self only	Employee share of self only premium
If unaffordable	Opt out to use a tax credit	Cannot opt out, reduce the tax credit by the QSEHRA amount	Tax credit possible if you decline

The practical differences: a QSEHRA is simpler and built for very small employers, but it has a dollar cap. An ICHRA has no cap and more design flexibility, with more rules to follow. A group plan gives everyone one shared network and one set of benefits, which some teams strongly prefer.

Who an ICHRA fits, and who it does not

An ICHRA tends to fit employers who want a fixed, predictable benefit budget, employers with staff spread across several counties or states, and businesses whose workers are healthy enough that group rates feel expensive. It can also help an owner offer something to part time or seasonal workers who would otherwise get nothing.

It fits less well where the individual market is thin. In the ten Texas counties I track, there was no marketplace PPO for 2026, and in Florida one carrier sells all of the marketplace PPOs. If your team wants broad PPO networks, a group plan may be the better match. Individual market prices also depend heavily on age, so older staff need larger allowances to buy the same plan. You can see what plans exist in your area on my county data pages.

If you are a small business owner in the Tampa area weighing a group plan against an ICHRA or QSEHRA, my Tampa small business guide walks through that decision. If you are the employee holding an ICHRA notice, the steps are simpler: check affordability, pick a plan during your 60 day window, and keep your receipts.

Bottom line

An ICHRA turns health benefits into a defined allowance. Employees get to choose their own plan, and employers get a known cost. The trade offs are real: the affordability test decides whether employees can use tax credits instead, and the local individual market decides how good the choices are. I'm Carson Hornish, an independent broker licensed in 31 states (NPN 21581721). I help employees pick plans under an ICHRA, and when a group plan or no change at all is the better answer, I will say so. Here is why my help is free.

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