ICHRAs — Individual Coverage Health Reimbursement Arrangements — are an employer-provided group health benefit changing how employees get health insurance. 

ICHRAs benefit everyone, offering a powerful alternative to traditional group health benefits because they provide: 

  • Greater cost control for employers 
  • Freedom of choice for employees 
  • A way for brokers to retain business amid unsustainable group rate increases 

In this article, we break down ICHRA benefits for employees, employers, and brokers and share how ICHRA administration is simple with technology like Nexben’s patent-pending payment solution. 

What is an ICHRA?

An ICHRA (sometimes called a defined contribution approach) is an employer-funded, tax-free health benefit used to reimburse employees for individual health insurance premiums and other qualified medical expenses. Employers set a monthly contribution amount for each employee, and employees use that contribution to shop for an individual policy that best fits their needs.

ICHRAs are different from traditional group health insurance (sometimes called a defined benefit approach), where employers select a one-size-fits-most group plan that typically limits employees to one to three policies.

ICHRA benefits for employees

ICHRAs offer three key benefits to employees:

1. Offers more choice in coverage options

In a traditional group plan, employees typically only get to choose from one to three health insurance policies. However, when offered an ICHRA, employees can select whichever policy from the individual health insurance marketplace best fits their needs. In 2025, over 9 insurers are participating in the individual marketplaces in each state providing significantly more coverage choices to employees than a group plan. 

2. Presents tax advantages

Because the policies purchased through an ICHRA are individual policies, employees can take the coverage with them if they leave the company. 

3. Provides coverage portability

The monthly contributions that employers offer their employees are pre-tax funds. In other words, employees get help paying for their health insurance coverage without the funds increasing their taxable income. 

In many cases, the same is true for any remaining balance that an employee is responsible for after their employer’s contribution: the remaining amount can be deducted from the employee’s paycheck, pre-tax. 

The Nexben experience for employees

Shopping for, enrolling in, and paying for an individual health insurance policy is simple when employees get access to Nexben: 

  • Employees get access to their employer’s contribution through a unique bank account (not a debit card). This bank account is important because it ensures a secure and compliant payment transfer and because not all carriers accept payment via a credit or debit card. 
  • Employees do not have to front the full premium cost and then wait for their employer to reimburse them. 
  • If employees choose a policy that costs more than the employer’s contribution, the remainder may be payroll deducted pre-tax.
  • Selecting an individual policy is a new experience for many employees. With Nexben, employees get access to benefits experts who can help them shop for, evaluate, and choose the plan that makes the most sense for them.

ICHRA benefits for employers

ICHRAs have historically made the most sense for small employers with 50 or fewer employees. However, they’re now just as relevant for large employers, with Applicable Large Employers (ALEs) being the fastest-growing ICHRA segment.

1. Enables controlled healthcare costs

Employers have greater control over their healthcare costs with ICHRAs because they can choose how much in monthly contributions they’d like to offer their employees.

These defined contributions are the maximum amount an employer will spend each month. Any contribution amounts not used by employees are forfeited and may be available to the employer to contribute to other policy types or to pay plan expenses.

With ICHRAs, employers are no longer at the whim of steep and unpredictable group rate increases and can confidently set their benefits budgets year after year.

2. Eliminates the burden of choosing coverage for employees

By moving employees from a traditional group plan to an ICHRA, employers get out of the business of picking which plan(s) are best for their employees. Instead, ICHRAs give employees access to the individual health insurance marketplaces, where they can choose the best policy for them and their specific needs. Nexben can work with any
marketplace that an employer already uses or wants to use.

Eliminating this significant decision allows businesses more time to focus on what they do best instead of navigating the complex world of health benefit design and administration.

3. Works as a recruitment and retention tool

Employees increasingly want more choices in their benefits. According to a recent survey from WTW, of the employees with the most choice in benefits, 78% would recommend their employer as a good place to work. ICHRAs are an effective way to give employees more choice while continuing to offer strong benefits through defined contributions.

4. Reduces administrative stress

ICHRAs remove some of the administrative stress of managing a health plan, including handling annual renewals and meeting participation requirements. With ICHRAs, employers deal with neither. Plus, employers can use a payment technology solution like Nexben to streamline benefits administration even more.

5. Can be started at any time during the year

Offering an ICHRA triggers a Special Enrollment Period (SEP), allowing employees to buy coverage from the individual market outside the Annual Open Enrollment Period. This flexibility enables employers to transition from costly group health plans that have become unsustainable for the business. For employers that don’t currently provide benefits, ICHRAs make it possible for them to start offering a health benefit at any time during the year.

The Nexben experience for employers

Onboarding and ongoing account management are simple when employers use Nexben, which acts as a single platform for employers to set up, transfer, and manage employee premium payments for ICHRA plans:
  •  Employers add employee data via a simple spreadsheet upload to their Nexben account.
  • Employees can work directly with brokers and enrollment advocates (not the employer’s HR team) to select the individual coverage that fits their needs best.
  • Employers click one button to pay a single invoice that combines all of their employees’ premiums. Nexben’s payment technology distributes all defined contributions across all employee benefit plans, regardless of how many different insurance carriers employees choose from.
  • Nexben provides necessary reports to support payroll and ACA reporting requirements.
  • Employers pay Nexben an administrative fee per enrollee per month for the employees actively using the platform. Any size group can leverage Nexben’s payment solution without minimum enrollment requirements or setup and renewal fees.

ICHRA benefits for brokers & distribution partners

Some brokers and distribution partners still get a little spooked by ICHRAs. But the most forward-thinking among them are learning why it’s so critical to embrace ICHRAs— and just how much ICHRAs can offer their business. Here are the key ICHRA benefits for brokers and distribution partners:

1. Retain clients that can’t sustain group rate increases

The truth is that the traditional group health insurance market is not working anymore for many employers (both large and small). Rate increases are too high, and they need an alternative. ICHRAs are just that.

If brokers don’t present ICHRAs as an option to their clients, they will likely find the option elsewhere. By partnering with a payment technology company like Nexben, brokers can retain their status as agent of record on employee plans while offering their clients a compelling solution that helps them control costs.

2. Get the flexibility to choose enrollment involvement

When brokers partner with an ICHRA technology company like Nexben, it’s up to them to decide just how involved they’d like to be in employee health insurance enrollment. They can choose to retain their status as agent of record and help employees select policies— or they can send employees to one of Nexben’s enrollment partners or distribution partners and instead get compensated by those partners based on their referral or advisory fee structures.

The Nexben experience for brokers & distribution partners

When brokers and distribution partners offer ICHRA plans with Nexben, they have minimal administrative burden:
  • The broker’s role is to help clients develop an effective ICHRA strategy that lowers or stabilizes the company’s healthcare costs, satisfies affordability requirements (if applicable), and still provides employees with a strong benefit package.
  • Brokers and distribution partners get access to the Nexben platform, where they can invite new employer groups to Nexben and track their clients’ enrollment statuses.
  • Brokers and distribution partners also get access to Nexben’s partner portal, which includes learning modules and resources about ICHRAs and information about how Nexben works. More personalized, hands-on guidance is available via our partner success team.
The true power of ICHRAs is that they benefit everyone. They offer freedom of choice for employees, cost control for employers, and new ways to grow and maintain a book of business for brokers and distribution partners. Nexben’s technology solution amplifies these benefits, simplifying how ICHRAs can be offered and how individual policies can be purchased and paid for.

About Nexben

Nexben is a financial technology company that helps employers, brokers, and distribution partners reap all ICHRA benefits. Get in touch if you’d like to learn more about how offering Nexben can help you deliver the best options to your employer clients and their employees.