For some groups the group plan is still the better answer, and the way to know is to compare them.
An ICHRA is not always cheaper or better. The right choice depends on participation, claims, class mix and what employees value, so we model both before recommending either.
What decides between the two.
Participation
A group plan works best when most employees enroll. Low participation changes the math.
Claims Experience
A group with favorable claims may do well on a group plan, and a group with high claims may do better with individual coverage. Look at the data first.
Class Mix
Groups with very different employee classes often benefit from separate allowances.
Cost Predictability
A fixed allowance caps the employer cost, while a group plan renews at whatever the carrier asks.
Employee Choice
An ICHRA gives employees many plan choices and a group plan gives one or a few. Employees value this differently.
Hybrid Options
An ICHRA can cover some classes while a group plan covers others. Hybrids often fit mixed workforces.
How to compare an ICHRA with the group plan.
The comparison that matters is not average cost against average cost. It is what each option costs at the participation you will really get, class by class, with a plan for the employees who decline.
What actually drives the cost
A group plan costs the employer a contribution for every employee who enrolls, at whatever the carrier charges. An ICHRA costs the employer the allowance for every employee who enrolls in an individual plan and submits proof of coverage. The allowance is set by the employer and does not change at renewal unless the employer changes it. That makes participation and the allowance level the two numbers to model.
An illustrative example
A group has 25 eligible employees. Today 16 enroll in the group plan and the employer pays $520 a month for each enrolled employee. The ICHRA would pay a $400 allowance. The figures are made up to show the mechanism.
| Option | Employees enrolled | Monthly employer cost |
|---|---|---|
| Group plan today | 16 | $8,320 (16 x $520) |
| ICHRA, same participation | 16 | $6,400 (16 x $400) |
| ICHRA, more employees enroll | 19 | $7,600 (19 x $400) |
| ICHRA, everyone enrolls | 25 | $10,000 (25 x $400) |
Illustrative only. The break-even point depends on your real premiums and allowance.
In this example the ICHRA costs less until about 21 of 25 employees enroll, because $8,320 divided by $400 is 20.8. Past that point the group plan is cheaper, so the answer depends on how many employees would use the allowance. Affordability still has to pass, which can push the allowance above $400 for lower-paid or older employees.
When each tends to win
- Group plan: high participation, favorable claims, a workforce in one rating area and employees who like the current plan.
- ICHRA: classes with very different pay or location, low participation, a need for a fixed budget, or employees in several markets.
- A hybrid: a group plan for one class and an ICHRA for another, with counsel confirming the design.
Five steps to compare fairly
- Pull the current enrollment and employer cost by class.
- Model the allowance by class, including the smallest allowance that passes affordability.
- Run the ICHRA at low, expected and full participation.
- Add the cost of enrollment support and any plan changes for employees who decline.
- Start early enough that the 90 day notice can still be met before the renewal date.
We run the comparison on your census, and if the group plan wins, we say so.
The questions employers ask about ICHRA versus a group plan.
Can I offer both?
Yes, for different classes, with rules about who can be in each. Counsel should confirm the design.
How do I compare costs fairly?
Compare the full employer cost of each option across every class, not just the average.
When is the group plan better?
Often when participation is high, claims are favorable and employees are happy with the plan.
When is an ICHRA better?
Often when classes differ, participation is low or the budget needs to be fixed.
Does switching mean retraining employees?
Yes. Employees shop for individual coverage, so enrollment support matters.
What about renewal timing?
Start the comparison well before renewal so the 90-day notice can still be met.
Do you recommend one over the other?
We recommend whichever fits your numbers. If the group plan wins, we say so.
General information about individual coverage HRAs, not legal or tax advice. Plan-specific questions belong with ERISA counsel and your tax advisor, and we will bring them in.
Where these details come from.
This page summarizes public guidance reviewed in October 2026. Rules change, so confirm current requirements with counsel.
CMS: Individual Coverage HRAs →
U.S. Department of Labor: Employee Benefits Security Administration →
More ICHRA questions and the industries they affect.
Allowance Cost Modeling
Peak and slow season budgets.
Affordability by Class
Test the ACA affordability rule class by class.
Employee Enrollment Help
How employees compare and enroll in coverage.
ICHRA for Professional Services
Partners, associates and support staff.
ICHRA for Technology Companies
Salaried teams, remote hires and contractors.
ICHRA for Medical and Dental Practices
Clinical staff, owners and associates.
ICHRA vs QSEHRA vs HRA
How the three arrangements differ.
ICHRA Pros and Cons
What employers gain and what they take on.
Send us your renewal.
We’ll tell you whether it looks competitive, where we see opportunity, and the five questions we’d put to your carrier. No cost, and no obligation to move anything.
The renewal letter
Your current plan summary
Contribution split by tier
Enrolled counts by tier
Four documents — two more if your group is 50 or more. Nothing else; every extra one is a reason to postpone.
An independent employee benefits consulting firm. We look at the entire benefits program: cost, plan performance, risk and administration.
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