Employers set a defined, tax-free reimbursement amount for employees to use toward individual health insurance and, if allowed, other medical expenses. Employees purchase an ACA-compliant individual health insurance plan and submit proof of their premiums and eligible expenses. Employers then reimburse employees up to the set amount. For example, if an employer offers $400 per month and an employee purchases a $450/month plan, the employee would pay $50 out-of-pocket. However, employers can customize reimbursement amounts and expense eligibility, meaning ICHRA structures may vary.
