An Individual Coverage Health Reimbursement Arrangement (ICHRA) allows employers to offer tax-free monthly health benefit allowances that employees can use to purchase their own individual health insurance plans. This approach gives small businesses greater cost control and predictability while offering employees more choice and flexibility. As health care costs rise and the individual market strengthens—especially in Colorado—many employers are shifting to ICHRAs as a sustainable, competitive strategy to support recruitment, retention, and overall employee well-being.
This article provides an overview of key decision points and factors small business owners should consider as they transition to an ICHRA. Download our free guide for a step-by-step action plan for transitioning to and ICHRA.
1. Start with Strategic Planning
Set a clear budget. Set a realistic budget for the organization to contribute to health coverage. Define allowances by employee class (e.g., full-time, part-time). Typically, employers set allowance amounts based on a percentage of a target plan, such as the lowest-cost gold plan.
Choose employee classes thoughtfully. Create classes that align with your workforce and business goals (e.g. full-time, part-time, seasonal, salaried, geographic location, etc.). Classes help ensure fairness and predictability.
Scan the individual market. Ensure your employees will have access to adequate, affordable individual health plans in your region. Peak Health Alliance can support this step.
2. Partner with Experts
Work with a knowledgeable broker. Your broker will help with market analysis, cost projections, employee education, and ongoing support.
Select the right ICHRA platform. Choose a platform that handles compliance, onboarding, data management, and communication with your broker. This reduces administrative burden.
Legal setup made simple. Your broker and platform will help prepare the required plan documents and ensure compliance with IRS and ACA rules.
3. Establish a Payment and Reimbursement Structure
Choose your payment approach. Small businesses often prefer:
- Employer-paid premiums (platform/broker pays directly on your behalf) — simplest for employees.
- Employee-paid with reimbursement — provides flexibility but requires more employee engagement.
Verification is streamlined. In most cases, the platform verifies employee enrollment in a qualified health plan and shares this information directly with your broker. Employers rarely need to manually review documents.
4. Communicate Early and Often with Employees
Start communication before the transition. Clearly explain:
- Pros: More plan choices, ability to choose coverage that fits personal/family needs, potential cost savings.
- Cons: More plan options can feel overwhelming; selecting the right plan takes time and attention.
Ensure access to expert guidance. Your broker should be available to:
- Host group educational sessions
- Meet with employees individually
- Help employees choose a plan that meets their needs
Share simple, clear educational tools. Provide FAQs, checklists, timelines, and decision guides.
5. Support Employees Through Enrollment
Provide clear timelines. Share important dates and reminders so employees do not miss their enrollment window.
Offer hands-on assistance. Encourage employees to attend broker-led sessions. Consider allowing work time for employees to meet with the broker or review plan options.
Confirm enrollment. Your platform and broker will confirm that employees have enrolled in qualifying coverage to receive ICHRA funds.
6. Ensure Ongoing Compliance & Support
Stay aligned with ACA and IRS rules. Your platform and broker help maintain compliance, including affordability requirements when applicable.
Evaluate annually. Review your allowance amounts, employee classes, and employee experience each year.
Lean on Peak Health Alliance. Benefit from lower individual market rates (15–20% lower than small group plans in Colorado) and local support.
Key Benefits of ICHRA for Small Employers
- More affordable than small group coverage
- Flexible contribution strategies
- Access to lower individual market rates
- Supports recruitment and retention
- Seasonal and part-time workers gain access to coverage
- Tax-advantaged for both employers and employees
- Choice and flexibility for your workforce
Plain Talk: How to Explain ICHRA to Employees
- “It isn’t one-size-fits-all — you get to pick what works for you.”
- “You’ll see lower rates than most small group insurance.”
- “It’s a simple, flexible benefit that supports you and your family.”
- “We’re partnering closely with experts who will help you learn the ins and outs.”
Need Help?
Peak Health Alliance and your selected broker are here to support your business at every step — from setup to employee education to ongoing compliance.
Call Peak Health Alliance at 970-455-0381 or email us at info@peakhealthalliance.org for broker recommendations in our service area.
Consult our step-by-step guide for employers transitioning to an ICHRA:
GET THE GUIDE