What is ICHRA? A plain-English guide for brokers
What is ICHRA? (And how do you say it?)
ICHRA stands for Individual Coverage Health Reimbursement Arrangement — a name so unwieldy that even the people selling it don't use it. You'll hear it as ICHRA, pronounced ICK-Ruh. When you're explaining it to a client, here's the one-liner that lands:
Instead of the employer picking one health plan for the whole team, they give each employee a fixed monthly budget and let everyone choose their own plan.
You set the budget. They choose the plan. StretchDollar handles the rest.
Congress created ICHRA in 2020 because the traditional small-group market was failing small businesses — too expensive, too rigid, and too administratively painful. For brokers, that failure created a gap. ICHRA is how you fill it.
Why your small business clients keep saying no to group insurance
You already know this conversation. The client asks about benefits, you pull together quotes, and the number is too high, the participation requirement can't be met, or the plan doesn't work for a team spread across three states. Here's why it keeps happening:
Unpredictable Costs
Group health insurance premiums increase every year — sometimes by double digits. Your clients have no control over the rate hikes, which makes it nearly impossible for them to budget for benefits year over year.
The Participation Barrier
Many group plans require at least 60% of eligible employees to enroll. If several team members are covered elsewhere — through a spouse, Medicare, or another source — the group doesn't qualify. Your client walks away with nothing.
One-Size-Fits-None Coverage
You're forced to find one plan that works for a team with completely different needs. Different cities, different doctors, different life situations. It rarely works well for everyone, and your clients know it.
The result?
Small businesses keep walking away from benefits conversations — and you keep walking away from potential accounts. ICHRA changes that.
What happens after you hand them off
Once you've run a quote and your client is ready to move forward, here's what they do on their end. Knowing this process means you can brief them confidently and answer questions before they ask.
They set their budget
Your client chooses how much tax-free money to contribute toward employee health insurance each month. They can offer the same amount to everyone, or customize by employee class, family status, or use Smart Rates™ to account for age and location. You can pre-populate this from the quote you built in the broker portal.
They confirm their policy
They answer a few questions about the business, confirm a start date, and choose a waiting period — 0, 30, 60, or 90 days before new employees become eligible.
They connect their account and invite their team
They add a business bank account and confirm which employees are eligible. StretchDollar sends invitations automatically. If they use payroll software, the employee roster imports in one click.
We handle everything else
Once employees enroll, your client's only job is to approve reimbursements. StretchDollar processes payments, handles IRS compliance, and delivers a 1095 report at tax time. You stay in the relationship. We handle the administration.
The part your clients will ask you about most
One of the first questions you'll get from a client: "Will my team actually be able to do this?" Yes — and here's exactly what their employees go through so you can answer confidently.
Add a bank account
Employees connect the bank account where they'd like to receive their monthly reimbursements. StretchDollar sends payments directly via ACH — no debit cards, no special accounts, no middleman. Just a direct deposit into the account they choose.
Shop for a plan
Each employee uses StretchDollar's shopping platform — or gets 1:1 guidance from a licensed broker — to find an ACA-compliant plan that works for their doctors, prescriptions, and budget. Most find a plan in about 30 minutes, with more options than a traditional group plan would have offered.
Enroll in auto-reimbursements
Employees upload proof of coverage. Once the admin approves it, their tax-free allowance arrives automatically before the 1st of each month, every month, for the rest of the plan year. Nothing else required.
ICHRA vs. traditional group insurance
Why ICHRA belongs in every broker's toolkit
Think about the small business conversations you've had to walk away from: the 12-person restaurant that couldn't hit the participation minimum. The startup that keeps asking about benefits but balks at the group quote. The client whose renewal just came in 13% higher.
ICHRA is your answer for all of those. The brokers leading with it are winning accounts that used to be dead ends.
How the broker flow works
Here's exactly where you fit in:
You run a quote
Guide your client's ICHRA benefit and have it pre-populated in their onboarding.
Employer confirms and sets up
They finalize the policy, connect their bank account, and confirm which employees are eligible.
Employees shop and submit
Each employee picks a plan on the marketplace and submits proof of coverage for approval.
Everyone relaxes
StretchDollar automates reimbursements and compliance from here. The dachshund approves.
How to spot a good ICHRA prospect
Fewer than 50 employees — especially under 20
History of missed participation minimums
Group renewals above 10% year over year
Remote or multi-state workforce
They've said "we can't afford benefits," that's an opening
Important ICHRA rules for small businesses
Good news: if you have fewer than 50 employees, you're in what's called the non-ALE (non-Applicable Large Employer) market — which means fewer compliance requirements and more flexibility than large companies face. That said, there are three rules worth knowing upfront so there are no surprises later.
S-Corp owners and sole proprietors can't participate
If your client owns an S-Corp or sole proprietorship, they can't receive ICHRA reimbursements themselves. Their non-owner employees absolutely can. And S-Corp owners can still deduct their health insurance premiums on their personal Form 1040 — same as they do now. Worth flagging this early so it doesn't come up as a surprise.
Offering ICHRA triggers a special enrollment period
When your client sets up an ICHRA, their employees get a 60-day special enrollment period — meaning they can shop for and switch to an individual plan outside of the normal open enrollment window. This is a selling point: you can onboard a new ICHRA client any time of year, not just during open enrollment season.
ICHRA and premium tax credits can't be combined
An employee can receive the ICHRA allowance or claim an ACA premium tax credit — not both. If your client's allowance is generous enough, it typically outweighs what the subsidy would have been. If affordability is a concern, the StretchDollar budget calculator can help you find the right contribution level during the quoting process.
Questions we get all the time
Is there a limit on how much a client can contribute?
No. ICHRA has no IRS contribution cap, giving your clients complete flexibility to decide how much to contribute toward their employees' health insurance. For businesses with fewer than 50 employees, there's also no minimum contribution requirement.
That said, employee participation and satisfaction tend to improve when the employer covers a meaningful portion of the premium. Many employers aim to cover at least 50% of an employee's monthly premium. StretchDollar's budgeting and quoting tools give you a fast way to model contribution scenarios with a client and land on an amount that balances their budget with real value for their team.
Can a client offer ICHRA and a group health plan at the same time?
Yes — but not to the same employees.
Federal rules allow employers to offer a traditional group health plan to one employee class and an ICHRA to another, as long as the classes are clearly defined and meet compliance requirements. For example, a client might offer a group plan to full-time employees and an ICHRA to part-time employees.
These arrangements are often called "carve-outs" and have specific regulatory requirements. StretchDollar is designed primarily for businesses with fewer than 50 employees. If you're structuring a carve-out for a client, reach out to our team and we'll help determine whether it's a fit.
What if an employee is already covered by their spouse's plan?
To receive tax-free ICHRA reimbursements, an employee must be enrolled in qualifying individual health insurance coverage.
If an employee is covered solely through a spouse's group health plan, they can't use ICHRA funds while remaining on that coverage. They may choose to leave their spouse's plan and enroll in their own qualifying individual health plan to take advantage of the ICHRA benefit — something worth flagging early in enrollment conversations with clients' employees.
Does ICHRA work for remote and multi-state teams?
Absolutely. In fact, remote and multi-state teams are often ideal candidates for ICHRA — and a natural fit for brokers managing clients whose workforce spans several states.
Instead of trying to find a single group health plan that works everywhere, each employee shops for coverage available in their own area. Employees in Austin, Denver, Nashville, or anywhere else can choose plans with local networks, doctors, and pricing that fit their needs, without you having to piece together a multi-state group solution.
What does StretchDollar cost?
StretchDollar has a simple pricing structure for your clients.
- $100 per month platform fee
- $25 per participating employee per month
There are no hidden fees, and we don't earn commissions that increase your clients' employees' premiums. You can read more on our pricing page or use our budget calculator to estimate a client's total monthly cost.
What does StretchDollar cost my client?
Eligible employees can pick from on- and off-exchange individual plans based on where they live. Most areas offer plans from 5 or more national and regional carriers (like Blue Cross Blue Shield & UnitedHealthcare) plus dozens of coverage options to fit different needs and budgets. Ready to get started?
Ready? Here's what to do next
Setting up an ICHRA with StretchDollar takes less time than it takes to finish that morning coffee. You just need a budget and a team.
Create your broker portal
Quote your first client from the portal
Once they confirm, onboarding begins automatically
Learn more
