Your employer gave you money to buy your own health insurance (ICHRA)
An ICHRA (Individual Coverage Health Reimbursement Arrangement) means your employer gives you a set amount of tax-free money each month to buy your own individual health plan, instead of offering a traditional group plan.
Here's how to use it:
- Confirm your monthly allowance and the rules from your employer.
- Shop for an individual plan, often through the enrollment platform your employer's ICHRA administrator provides, or directly from an insurer (off-exchange), or on healthcare.gov / your state marketplace. In practice, most ICHRA enrollees choose an off-exchange plan.
- Pick by total annual cost: premium minus your allowance, plus expected out-of-pocket. Make sure your doctors and drugs are covered.
- Enroll and submit proof so your employer reimburses you.
The big catch: if your employer offers an ICHRA that counts as "affordable," you generally cannot also take an ACA premium subsidy. You choose one or the other (see below).
What an ICHRA actually is
Instead of buying one group plan for everyone, your employer sets aside a monthly dollar amount for you and lets you choose any qualifying individual-market plan. You own the plan, so it stays with you even if you change jobs, and your employer reimburses your premium (and sometimes other eligible medical costs) up to your allowance, tax-free. The allowance can vary by things like age and family size, but your employer must offer it fairly across similar groups of employees.
How the money works
- Tax-free: the reimbursement isn't counted as taxable income to you.
- You pay, then get reimbursed (or it's paid through payroll, depending on setup). You must be enrolled in a qualifying individual plan to receive it.
- If the plan costs more than your allowance, you pay the difference, usually with pre-tax dollars through payroll. Your employer may let you pay that remainder pre-tax through payroll, but only if you buy your plan off-exchange (directly from an insurer); premiums for plans bought on the marketplace can't be paid pre-tax.
- If the plan costs less, you typically can't take the leftover as cash. Unused allowance generally stays with the employer.
The subsidy trade-off (read this before you enroll)
This is the part that trips people up. Whether you should take the ICHRA or an ACA subsidy depends on whether your ICHRA is "affordable" under IRS rules. Roughly, that means whether your share of the premium for the lowest-cost Silver plan available to you (self-only), after your allowance, is below a set percentage of your household income (the exact percentage is set each year).
For 2026, the IRS set that threshold at 9.96% of household income, the highest it has ever been, so more ICHRA offers will count as "affordable" than in prior years.
| If your ICHRA is… | Your options |
|---|---|
| Affordable | Use the ICHRA. You are not eligible for an ACA premium subsidy. |
| Unaffordable | You may opt out of the ICHRA and claim an ACA subsidy instead, whichever leaves you better off. You can't combine both. |
Bottom line: compare your net cost both ways before deciding. Don't assume the subsidy is always better, because a generous ICHRA often beats it.
Step by step: choosing your plan
- Get your number. Confirm the exact monthly allowance and what it can reimburse (premium only, or other medical expenses too).
- Do the allowance math. For each plan: monthly premium minus allowance equals your real monthly cost. A higher-premium plan can become affordable once the allowance is applied.
- Add expected out-of-pocket. Then compare plans on total annual cost, exactly as in our main plan-choosing guide: premium (after allowance) plus what you'll spend on care.
- Check doctors and drugs. Confirm your providers are in-network and your prescriptions are on the formulary.
- Enroll and submit proof. Buy the plan, then give your employer or its administrator the documentation they need to start reimbursing you.
Where to shop, and your enrollment window
You can usually buy your plan on healthcare.gov or your state marketplace, or directly from an insurer (off-exchange). Use the marketplace if there's any chance you'll claim a subsidy; buy off-exchange if you want to pay any remaining premium pre-tax through payroll. You generally can't do both at once.
Being newly offered an ICHRA triggers a special enrollment period, generally 60 days, so you can enroll even outside the annual open-enrollment window. Act early, because your coverage start date depends on when you sign up.
Visuary provides decision support, not licensed insurance or tax advice. ICHRA rules, affordability percentages, and the "affordable" calculation are set by the IRS and can change each year. Confirm specifics with your employer's plan documents, a licensed broker, or a tax professional.
Frequently asked questions
What is an ICHRA in simple terms?
An ICHRA (Individual Coverage Health Reimbursement Arrangement) is when your employer gives you a set amount of tax-free money each month to buy your own individual health insurance, instead of offering a traditional group health plan. You choose the plan, and your employer reimburses you up to your allowance.
Can I keep my ACA subsidy if my employer offers an ICHRA?
Usually not at the same time. If your ICHRA is considered "affordable" under the IRS rules, you are not eligible for a premium tax credit (ACA subsidy) and should use the ICHRA. If the ICHRA is "unaffordable," you can instead turn down the ICHRA and claim the subsidy, but you cannot use both the ICHRA and a subsidy together. Compare which one leaves you better off.
Do I have to buy insurance through the marketplace to use an ICHRA?
You must be enrolled in a qualifying individual health plan (or Medicare) to be reimbursed. You can usually buy that plan on healthcare.gov or your state marketplace, or directly from an insurer. If you might qualify for a subsidy when the ICHRA is unaffordable, use the marketplace so you can claim it.
What happens to the money if my plan costs less than my allowance?
It depends on how your employer set up the ICHRA. Many ICHRAs only reimburse your actual premium (and sometimes other eligible medical expenses) up to your allowance, so you cannot pocket the difference as cash. Unused allowance generally stays with the employer. Check your plan documents for exactly what is reimbursable.
I was just offered an ICHRA mid-year. Can I still buy a plan?
Yes. A new ICHRA offer triggers a special enrollment period, typically 60 days, during which you can enroll in an individual market plan even outside of open enrollment. Do not wait, because the window is limited and your coverage start date depends on when you enroll.