Answers · ICHRA vs group
What are the pros and cons of an ICHRA for a small employer?
The main advantages are a fixed, predictable cost, no participation requirement and portability for employees; the main disadvantages are that networks vary employee by employee and that the model only pays off where the local individual market prices below small group.
On the employer side: you set the allowance, so your benefits cost is a number you choose rather than a renewal you receive. There is no participation minimum, no group medical underwriting, and no single network to force onto a workforce spread across several states. The allowance is tax-free to the employee and deductible to you, and set at an affordable level it can satisfy employer mandate obligations.
On the employee side: the plan belongs to them and moves with them, and they choose their own network and doctors instead of accepting one plan chosen for everyone.
The genuine drawbacks: employees each shop for their own plan, which is a real change in experience and needs support at enrolment. Networks differ plan to plan, so a practice or hospital that everyone uses today needs checking before anything changes. Employees offered an affordable ICHRA cannot also claim a premium tax credit. And in a county where the two markets price closely, the whole exercise may not be worth the disruption.
Last reviewed 2026-08-21. Premium figures are plan year 2026 on both sides of every comparison, from the CMS Marketplace Public Use Files (individual market) and Ideon (small group). Employer counts from BLS QCEW 2024 Q2. All savings figures are ranges and estimates, not quotes or guarantees.
Related questions
What is the single biggest advantage?
Cost predictability. You set the allowance, so your benefits cost is a number you choose rather than a renewal you receive.
What is the single biggest drawback?
Networks vary employee by employee, because each person picks their own plan. If everyone currently uses one hospital system, that needs checking before anything changes.
Can employees still get a premium tax credit?
Not if the ICHRA offer is affordable. An employee offered an affordable ICHRA must decline the allowance entirely to claim a tax credit, and cannot use both.