Employer-provided premiums rose 6% in 2025 due to numerous factors, including rising drug costs and network changes. As a result, many HR leaders, CFOs, and business owners seek ways to be more strategic about their employees’ health coverage. Limiting coverage can save money on premiums, but lower employee loyalty. Individual Coverage Health Reimbursement Arrangements (ICHRAs) can reduce costs while maintaining employee satisfaction, provided the right consulting and communication strategy is in place.
This article details how employers can educate their employees about ICHRAs, avoid confusion, and explain their options clearly.
What is an ICHRA?
Traditional employer-provided health plans are based on premiums paid by employers in exchange for market-based coverage. ICHRAs are relatively new alternatives based on health reimbursement. They allow employers to reimburse employees for individual health insurance premiums and eligible medical expenses, provided the employee is enrolled in qualifying individual health coverage.
This arrangement can benefit both employers and employees. For HR teams, ICHRAs provide more transparent budgeting since employers can set maximum reimbursement amounts. For employees, ICHRAs offer more freedom over health plans and more control over costs.
Additionally, in an age when many part-time, hybrid, and remote workers need employer-sponsored health coverage, ICHRAs can help businesses retain talent by offering more flexible coverage than competitors. Using an ICHRA, companies can extend benefits to non-traditional and off-site workers, increasing retention and satisfaction among these core groups without affecting other employees’ plans.
Why Employee Benefits Communication is Important
Personalized work models have driven demand for personalized benefits communication. According to recent studies, 54% of employees wish their health benefits communications were more individualized. Particularly among Gen Z employees, communication is an essential indicator of satisfaction with benefits, and 68% expect their employers to continue communicating about benefits after enrollment. More than half reported not fully knowing what their benefits are.
Essential Takeaway
Since ICHRAs are less well-known than traditional group plans, communication is even more significant in keeping employees on board and maintaining satisfaction with their benefits planning.
How to Communicate Benefits: Best Practices For Employers
Employers often present new benefit packages to address rising costs and increase employee satisfaction. However, clearly communicating these benefits can be just as important as offering them. These steps can help employers, owners, and HR leaders address the challenges of introducing ICHRAs to employees to prevent alienation and confusion during open enrollment.
1. Explain Qualifying Individual Health Plans and Costs
Employees need to know which health plans and expenses will be covered by their ICHRA if they enroll in one.The plans they choose must be ACA-compliant individual health insurance plans or Medicare coverage, including Medicare Parts A and B or Medicare Advantage. Employees must be enrolled in qualifying coverage to receive ICHRA reimbursements. However, many employees lack the knowledge to find a qualified plan, leading to ineligible benefits reimbursement. This can result in low retention rates and less participation in new health strategies, which offset their potential benefits to the business.
Communication Step: The earlier that staff receive communication about ICHRA benefits and limitations, the better. Provide frequent resources about how to shop for qualifying plans, without suggesting specific policies. These resources can include webinars, guides, meetings, Q&A opportunities, and more to clarify coverage and help employees recognize the steps they need to take to stay covered.
2. Keep ICHRA Contributions Financially Compliant
In addition to recognizing their benefits, employees need to know how ICHRA contributions work, including knowing that their employer follows affordability guidelines. According to the ACA’s 2026 guidelines, the affordability rate is 9.96%, meaning that an employee’s required contribution for coverage cannot exceed 9.96% of income, as measured using IRS-approved affordability safe harbors.
Communication Step: Outline the definition of affordability for employees, how income is calculated, and the options available if their coverage does not meet ACA guidelines.
3. Correctly Classify Employee Groups
ICHRA guidelines allow employers to separate employees into classes and set distinct premium limits for each. For example, salaried full-time workers can receive a larger contribution than hourly or part-time workers. Employers can vary ICHRA contributions by permitted employee classes and family status, such as full-time versus part-time employees or different coverage tiers, while complying with federal nondiscrimination and age-rating rules.
Communication Steps: Grouping employees can be advantageous, but transparency is paramount to establishing that employees feel they receive fair treatment. If different employment statuses, regions, or ages receive different contributions, clearly communicate the logic behind these differences.
4. Maintain Clear Claim Documentation
Clear medical claim documentation fulfills HIPAA requirements, but it also helps reassure employees about how their data is stored, how their claims are processed, and how their benefits are reviewed. A lack of transparency in claim documentation can leave employees feeling confused or uncertain about their security.
Communication Step: Clearly communicate HIPAA compliance practices and privacy protections in plan documentation so employees understand how their health information is protected and handled.
Local Employee Benefits Consultants Streamline Communication
Providing ICHRAs to employees can help HR leaders and business owners achieve higher planning and budgeting flexibility while offering employees individualized coverage options. However, many employees are confused about how ICHRAs work, what their benefits are, and what options they have.
At New City Insurance, our employee benefits consultants help businesses boost employees’ participation in new healthcare plans, reduce frustration during transitions, and improve employee satisfaction. Our goal is to empower employers to take practical, cost-effective approaches to benefits enrollment that keep employees informed about their benefits.
Contact our team today to learn how to strengthen benefits engagement in your workforce and offer ICHRAs the right way.