For decades, offering health benefits meant one thing for small businesses: negotiate a group plan, absorb 8–12% annual premium increases, and hope your employees were satisfied with the one plan you could afford. ICHRA changes all of that.
What Is ICHRA?
An Individual Coverage Health Reimbursement Arrangement (ICHRA) is an employer benefit structure established by the IRS in 2020. Instead of offering a single group plan, the employer sets a monthly tax-free allowance. Each employee uses that allowance to buy their own ACA-compliant individual plan.
The employer pays a fixed, predictable amount. The employee gets a plan that fits their life. And with Source Health Insurance plans, 85–89% of the premium the employer funds goes directly into the employee's Investment Premium Reserve.
Side-by-Side Comparison
| Group Plan | ICHRA + Source Health Insurance | |
|---|---|---|
| Employer monthly cost | $650+/employee | You set the amount |
| Annual increases | 8–12% typical | 0% (you control the allowance) |
| Employee choice | One plan | Any ACA plan in their state |
| Employee equity after 10 years | $0 | $40,000–55,000+ |
| FICA savings | No | Yes (7.65% on contributions) |
| ACA mandate compliance | Yes | Yes (if allowance meets affordability) |
| Minimum employer size | Varies by carrier | 2+ W-2 employees |
The Cost Math
A 12-person company paying $650/month/employee under a group plan spends $93,600/year. With ICHRA at a $400/month allowance, the same company spends $57,600/year — saving $36,000 annually plus FICA savings of approximately $2,750.
That $36,000 in employer savings, combined with $40,000–55,000+ in employee equity built over 10 years, represents the real financial transformation ICHRA + Source Health Insurance enables.
Compliance Considerations
ICHRA satisfies the ACA employer mandate for applicable large employers (50+ FTEs) if the allowance meets the IRS affordability threshold. For small employers below 50 FTEs, the mandate does not apply, but ICHRA still delivers significant tax advantages and employee satisfaction benefits.
[Placeholder — expand with ICHRA class structures, affordability safe harbors, and integration with payroll providers.]