Employers evaluating ICHRA often want to know one thing above all: what does this actually look like for the people on my team? Here's the real step-by-step process.
Before the plan year starts (generally at least 90 days in advance), the employee receives a written notice stating their ICHRA contribution amount, which class they're in, and information relevant to whether they might also qualify for marketplace premium tax credits. This notice is the employee's first real signal of what's being offered and how much.
The employee shops for their own plan — through HealthCare.gov, a state marketplace, or off-exchange directly with a carrier — the same way anyone buying individual coverage would. They can compare plans by premium, deductible, and network the same as any individual shopper, and pick whichever fits their situation, not a plan the employer selected for them. A new ICHRA offer triggers its own special enrollment period, so employees aren't limited to only enrolling during the standard annual open enrollment window.
Once they select a plan, enrollment happens directly with that insurance carrier — Independence Blue Cross, Aetna, UnitedHealthcare, or whichever carrier offers the plan they picked. The employer isn't the policyholder and doesn't manage this relationship; the employee's contract is with the carrier, just like anyone else buying individual coverage.
This is one of the biggest mental shifts for employees used to group coverage: their insurance ID card, member portal login, and customer service line all come directly from the carrier they picked — not from HR, and not branded with the employer's name. If they call about a claim or find a doctor, they're calling their carrier directly, the same as any individual policyholder.
Exactly how payment flows depends on how the employer sets up the plan. In some setups, the employee pays their own premium directly to the carrier and submits proof for reimbursement up to their ICHRA allowance. In others, employers or their ICHRA administrator handle premium payment more directly on the employee's behalf. Either way, reimbursement for a substantiated individual health insurance premium is tax-free to the employee, the same tax treatment as a traditional employer premium contribution.
To receive ICHRA reimbursements, an employee needs to be in an eligible class as defined by the employer, and enrolled in individual health insurance (marketplace, off-exchange, or Medicare) — group coverage through a spouse's employer, for example, doesn't qualify someone to receive ICHRA reimbursements toward it.
At minimum, ICHRA covers individual health insurance premiums. Employers can optionally extend it to other qualified medical expenses under IRC Section 213(d) — things like copays, prescriptions, dental and vision costs, and other out-of-pocket medical expenses — though doing so affects HSA compatibility (see our comparison of ICHRA, HSA, and FSA for that interaction).
Not necessarily the clinical details, but the employer (or its ICHRA administrator) typically needs proof of enrollment and premium payment to process reimbursement — usually a summary document or invoice from the carrier, not medical information.
You can decline the ICHRA offer. Depending on whether the offer is affordable under ACA rules, declining may make you eligible for a subsidized marketplace plan instead — worth checking both options before deciding.
Yes — that's one of the practical advantages. Since the plan is yours on the individual market, not tied to your employer's group plan, you keep the coverage itself when you leave; you'd just stop receiving the employer's monthly reimbursement.
You can generally use ICHRA funds toward a family individual-market plan, not just self-only coverage, depending on how the employer's class and contribution structure is set up.