ICHRA or Keep the Group Plan

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.

Ask Whether an ICHRA Fits

What To Know

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.

Worked Example

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

  1. Pull the current enrollment and employer cost by class.
  2. Model the allowance by class, including the smallest allowance that passes affordability.
  3. Run the ICHRA at low, expected and full participation.
  4. Add the cost of enrollment support and any plan changes for employees who decline.
  5. 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.

Questions We Get

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.

Sources

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 →

Let’s Get to Work

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.

What to send

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.

CFH Insurance Consultants

An independent employee benefits consulting firm. We look at the entire benefits program: cost, plan performance, risk and administration.

Switch to CFH. Unhappy with your broker? Your employees won’t notice. You will. →

Michigan41000 Woodward Avenue, Suite 350 East
Bloomfield Hills, MI 48304
248.370.8853
Colorado13540 Northgate Estates, Suite 100
Colorado Springs, CO 80921
719.425.2649
Texas16365 Park Ten Place, Suite 182
Houston, TX 77084
281.404.5670


Book a 30-minute call