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ICHRA for Small Businesses in Florida: Pros, Cons and Setup
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With an ICHRA, your business does not pick one group health plan for everyone. You set a monthly allowance, each employee buys their own individual health plan, and the business pays them back up to that amount. It can work well for a small Florida crew spread across several counties, but it still needs written rules and someone to run it.
What an ICHRA is, in plain English
ICHRA stands for Individual Coverage Health Reimbursement Arrangement. HealthCare.gov now calls it a CHOICE Arrangement (formerly ICHRA). It works like this:
- You, the owner, choose a monthly amount the business will pay toward each employee’s health insurance.
- Each employee buys their own individual health plan, such as a Marketplace plan.
- The employee shows proof of the coverage and what they paid, and the business pays them back up to the allowance.
- The money comes from the business. It is not a savings account the employee puts money into.
You can set different allowances for different groups of employees, such as full time and part time, but those groups (called classes) have to follow federal rules.
A worked example
Example only. These numbers are made up to show how the math works. They are not a quote or a real plan price.
Say a landscaping company in Pasco County offers an ICHRA of $400 a month to its full-time employees. Maria, a crew leader, has a household income of $48,000 a year, which is $4,000 a month.
- Maria picks an individual plan that fits her doctors and pays the premium.
- Each month she sends proof of payment, and the company pays her back up to $400.
- If her premium is less than $400, she gets back what she actually paid, not the full $400.
What “affordable” means, in plain words
The government checks whether an ICHRA offer is affordable for each employee. The test looks at the cheapest silver plan for the employee alone where they live. Take that monthly premium, subtract the allowance, and compare what is left with 9.96% of the employee’s monthly household income. That is the 2026 percentage published on HealthCare.gov: CHOICE Arrangements (formerly ICHRA). It changes every year, and we update this page when the new figures are published.
In Maria’s example, 9.96% of $4,000 is $398.40. Add her $400 allowance and you get $798.40. If the cheapest silver plan for Maria alone in her area costs less than $798.40 a month, the offer is affordable for her. If it costs more, it is not.
- Affordable: Maria and her household cannot get the Marketplace premium tax credit, even if she turns the ICHRA down.
- Not affordable: Maria can choose the ICHRA or the premium tax credit, but not both.
ICHRA vs QSEHRA vs group health insurance
With a group plan, the employer picks the insurance and everyone joins the same plan. With an ICHRA, each employee picks their own individual plan and the business pays them back. Businesses of any size can use an ICHRA if they have at least one employee who is not a self-employed owner. QSEHRA is a different arrangement for smaller employers, with yearly dollar limits and its own tax credit rules.
You cannot let the same employee choose between your group plan and the ICHRA. You can offer a group plan to one class and an ICHRA to another, but then each ICHRA class usually needs a minimum number of people (for example, at least 10 employees in a business with fewer than 100). Have the class setup reviewed before you announce anything.
Pros and cons for owners and employees
- For the owner: you set a fixed monthly budget instead of facing a group renewal increase you did not plan for.
- For employees: each person picks a plan that fits their own doctors, prescriptions and county.
- The tradeoff: more paperwork for enrollment and reimbursement, and plan choices and prices differ depending on where each employee lives.
An allowance that sounds generous can still leave an older employee or a family with a big premium or deductible. Run the numbers for a few real households on your crew before you announce the benefit.
How employees choose their own plan
Each employee gets a written notice that explains the allowance and whether the offer is affordable for them. New employees get it when they become eligible; current employees get it 90 days before each plan year starts.
Being offered an ICHRA opens a Special Enrollment Period, so an employee does not have to wait for Open Enrollment. They can pick a Marketplace plan within 60 days before or after they gain access to the ICHRA. Then they pay the premium and send proof to the administrator. We can help each employee compare the plans in their county.
Setup steps and administrators
- Write the plan documents and decide your employee classes and allowances.
- Send the required notices on time.
- Check that each employee has qualifying individual coverage.
- Collect proof of payment before reimbursing.
Most small businesses hire an ICHRA administrator for this work. Pick one that explains how fast reimbursements are paid and how employee information is kept private. Our agency helps employees choose and enroll in plans; your administrator, payroll provider and tax professional handle the legal, payroll and tax side.
Ask us if ICHRA fits your business
Bring the ZIP codes where your employees live, roughly how many people you have, your current benefits, the allowance you have in mind and your target start date. We will look at the individual plans available in those areas and tell you whether the allowance is realistic. Before you commit, make sure employees know who pays the premium, how fast they get paid back and who to call about a missing receipt or a coverage change.
Official resources: HealthCare.gov: ICHRA for employees; HealthCare.gov: Special Enrollment Periods; HealthCare.gov: job-based coverage and the Marketplace.
Frequently Asked Questions
What is an ICHRA?
An ICHRA is a way for an employer to pay employees back for individual health insurance they buy on their own, up to a monthly allowance the employer sets. HealthCare.gov now calls it a CHOICE Arrangement.
Is ICHRA better than group insurance?
Neither is better for every business. An ICHRA gives you a fixed budget and lets employees pick their own plans; a group plan keeps everyone on one plan. Compare where your employees live, the allowance, what employees would pay and the admin work.
What is the difference between ICHRA and QSEHRA?
QSEHRA is only for smaller employers and has yearly dollar limits; an ICHRA can be used by businesses of any size and has its own affordability test. The tax credit rules are different too, so do not apply QSEHRA rules to an ICHRA.
Can employees get tax credits with an ICHRA?
Not for the same months they use the ICHRA. If the offer is affordable, the employee and their household cannot get the premium tax credit even if they turn it down. If it is not affordable, they can choose the ICHRA or the tax credit, but not both.
How many employees do I need?
One can be enough. Businesses of any size can offer an ICHRA if they have at least one employee who is not a self-employed owner. Minimum class sizes apply if you also offer a group plan to other employees.
Who administers an ICHRA?
The employer is responsible, and most small businesses hire an ICHRA administrator to handle plan documents, coverage checks and reimbursements.
This guide is general information, not legal, tax or medical advice. Your plan documents, including the Summary of Benefits and Coverage, control what is covered and what you pay.
About the Author
Raymundo Guzman
I am Raymundo Guzman, a licensed independent insurance agent and the owner of Covered by Guzman. On the health side, I help Florida individuals, families and small businesses compare ACA Marketplace plans, Medicare Advantage and Part D, and dental and vision coverage, checking doctors and medications before anything is submitted. I work in English and Spanish, and a member of our team speaks Arabic. We usually meet by phone or video, and I stay available after enrollment.
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