As Individual Coverage Health Reimbursement Arrangements (ICHRAs) continue to gain momentum as an alternative to traditional group health insurance, many employers and employees still have questions about how these plans work. Unfortunately, lingering ICHRA participation myths about requirements, employee choice, and eligibility often create unnecessary barriers to adoption.

At Flyte Health Care Management, we regularly help employers separate fact from fiction. Many of the most common questions stem from comparing ICHRAs to traditional group health insurance. While both provide employer-sponsored health benefits, they operate under very different rules. Understanding those differences helps employers make informed decisions and confidently evaluate whether an ICHRA is the right fit.

Since ICHRA became available in 2020, Flyte has helped employers of all sizes understand the rules, evaluate their options, and successfully implement compliant ICHRA programs. That experience has provided valuable insight into the most common myths and questions surrounding ICHRA.

Let’s examine five of the most common ICHRA participation myths and the facts employers should know.

ICHRA Myth #1: ICHRA Requires a Minimum Participation Level

One of the most common misunderstandings among employers is that ICHRA plans operate like traditional group health insurance plans and therefore require a certain percentage of eligible employees to enroll.

The reality is quite different.

Unlike many traditional group health plans, ICHRAs do not require a minimum percentage of eligible employees to enroll. Employers can offer an ICHRA regardless of how many employees ultimately participate. This flexibility makes ICHRAs particularly attractive for organizations with diverse workforces, seasonal staff, remote employees, or locations spread across multiple states.

Traditional group plans are often subject to carrier participation requirements. When participation drops below those requirements, employers may face limited plan options, higher administrative challenges, or non-renewal. Those carrier rules do not apply to ICHRAs because employees purchase their own qualifying individual health insurance coverage.

This flexibility makes ICHRAs attractive for employers with seasonal, remote, multi-state, or otherwise diverse workforces.

ICHRA Myth #2: Employees are Forced to Participate

Another common misconception is that employees must accept an ICHRA if their employer offers one and purchase individual health insurance through the Marketplace.

In reality, employees generally have the option to either accept or decline the ICHRA benefit. The decision should be based on a careful comparison of the employer’s contribution, the cost of available Marketplace plans, and whether the employee and their family may qualify for premium tax credits through HealthCare.gov.

For some employees, the employer-funded ICHRA provides substantial value and makes accepting the benefit the clear choice. For others, particularly those with lower household incomes, it may be beneficial to compare the ICHRA allowance against potential Marketplace subsidies. If the employer’s ICHRA offer is not considered affordable under federal affordability guidelines and the employee would qualify for premium tax credits, they may choose to opt out of the ICHRA and pursue subsidized Marketplace coverage instead.

This is where education becomes especially important. Employees should understand how an ICHRA interacts with Marketplace financial assistance and how affordability is determined. The value of the employer contribution, household income, family composition, and local insurance costs can all impact whether accepting or declining an ICHRA is the best financial decision.

The key takeaway is that participation is not mandatory. Employees retain control over their healthcare choices and should evaluate all available options to determine which path provides the greatest value for their unique situation.

Employers that invest in clear communication, decision-support tools, and enrollment guidance typically experience smoother implementations, greater employee confidence, and higher overall satisfaction with their benefits program.

ICHRA Myth #3: Employees Must Choose a Specific Insurance Carrier

Many employees are accustomed to traditional employer-sponsored group health plans where the employer selects one insurance carrier and may offer only one or two plan options, sometimes with different provider networks. As a result, some assume an ICHRA simply changes how the benefit is funded while providing the same limited choices.

In reality, one of the defining advantages of an ICHRA is the freedom it gives employees to choose the health insurance plan that best fits their individual needs.

Employees who participate in an ICHRA may purchase qualifying individual health insurance coverage, either on or off the Health Insurance Marketplace, provided the coverage meets ICHRA eligibility requirements. Rather than being limited to an employer-selected insurance carrier, employees can compare available plans and select the option that best aligns with their healthcare needs and budget.

This flexibility allows employees to prioritize what matters most to them:

  • Preferred physicians and healthcare systems
  • Prescription drug coverage
  • Monthly premium costs
  • Deductible levels
  • Family healthcare needs
  • Specialized coverage requirements

For example, one employee may prefer a lower-premium plan with a higher deductible, while another may value broader provider networks or richer prescription drug coverage. Under a traditional group health plan, both employees are typically limited to the plans selected by the employer. With an ICHRA, each employee has the flexibility to choose qualifying individual coverage that best fits their unique healthcare priorities.

This level of choice is one of the reasons many employees view ICHRAs as a more personalized approach to employer-sponsored health benefits.

ICHRA Myth #4: ICHRAs are Only for Small Businesses

Because many early adopters of ICHRA were small employers seeking alternatives to expensive group health plans, some believe that ICHRAs are exclusively designed for small organizations.

The facts tell a different story.

Employers of every size, including Applicable Large Employers (ALEs), may offer an ICHRA. Approved employee classes allow employers to tailor eligibility and contribution strategies while improving budget predictability.

One of the reasons ICHRA continues to gain popularity is its ability to accommodate different workforce structures through approved employee classes. Whether an organization has full-time and part-time employees, multiple office locations, remote workers, or a mix of salaried and hourly staff, ICHRA provides the flexibility to tailor benefits eligibility and contribution strategies to fit those groups.

This adaptability allows employers to build a health benefits program that aligns with their workforce while improving budget predictability and employee choice.

For small employers, the advantages often center on predictable budgeting and simplified administration. For larger employers, the value frequently comes from scalability, customization, and workforce flexibility.

The bottom line is simple: ICHRAs are not just for small businesses. They are increasingly being used by organizations of all sizes.

ICHRA Myth #5: Any Medicare Enrollment Automatically Qualifies for ICHRA Participation

As more employers evaluate ICHRAs for older workers and Medicare-eligible populations, confusion often arises around eligibility requirements.

A common misconception is that Medicare Part B alone automatically qualifies an individual for participation in an ICHRA.

Current regulations require qualifying coverage, such as enrollment in Medicare Parts A and B together or a Medicare Advantage (Part C) plan that satisfies eligibility requirements. Medicare Part B alone does not meet the requirements necessary for ICHRA participation.

This distinction is important because improper reimbursements can create compliance risks for employers and employees alike.

Organizations considering ICHRA programs for Medicare-eligible workers should work with knowledgeable advisors to ensure compliance with Medicare Secondary Payer rules, reimbursement requirements, and federal regulations.

Proper education can help avoid costly misunderstandings and ensure participants receive the benefits intended under the program.

Why Education Matters

Many of the questions and concerns employers have about ICHRA participation stem from misunderstandings rather than actual regulatory limitations. Clear education leads to better decisions for employers and employees alike.

When employees understand that:

  • Participation minimums do not apply,
  • They are not forced to participate,
  • They can choose the qualifying individual health plan that best fits their needs,
  • Employers of any size can offer ICHRAs, and
  • Medicare participation requires specific eligibility criteria; they are far more likely to view ICHRA as a flexible and personalized approach to employer-sponsored health benefits.

As ICHRA adoption continues to grow, replacing outdated myths with accurate information helps employers make more informed benefits decisions while giving employees greater confidence in their healthcare choices.

Key Takeaways

Before deciding whether an ICHRA is the right fit for your organization, remember these five important facts:

  • ICHRAs do not require minimum participation.
  • Employees generally have the option to accept or decline an ICHRA.
  • Employees can choose qualifying individual health insurance coverage that best fits their healthcare needs and budget.
  • Employers of all sizes, including Applicable Large Employers (ALEs), can offer an ICHRA.
  • Medicare eligibility requires qualifying coverage. Medicare Part B alone does not satisfy ICHRA eligibility requirements.

Related Resources

Explore these additional resources to learn more about how ICHRA works and how it can support your organization’s benefits strategy:

Have Questions About ICHRA?

Whether you’re exploring ICHRA for the first time or evaluating whether it’s the right fit for your workforce, understanding the rules is the first step toward building a successful benefits strategy.

At Flyte Health Care Management, we work with employers across the country to design, implement, and administer compliant ICHRA programs. Whether you’re just beginning to explore ICHRA or looking to enhance an existing strategy, our team is here to answer your questions and help you build a benefits program that supports both your employees and your long-term business goals.

To learn more about ICHRA, explore the educational resources available on ICHRA.com and FlyteHCM.com. If you have questions about implementing an ICHRA for your organization, the Flyte Health Care Management team is here to help.