Making the move from your existing group health insurance to an individual‑coverage health reimbursement arrangement (ICHRA) can unlock cost control, choice for employees, and simplified benefits administration. But switching from group health to ICHRA takes more than canceling a plan and handing out allowance checks. You’ll need a clear roadmap.
In this guide, you’ll learn how to switch from group health to ICHRA by covering:
Evaluating whether the transition to ICHRA makes sense
Comparing group health insurance to ICHRA
Communicating the change to employees
Assisting employees with individual coverage selection
Compliance and administrative considerations when moving from group health to ICHRA
Ongoing support and adjustments after launch
A step‑by‑step implementation process
Let’s dive in.
Evaluating suitability of ICHRA for your organisation
Before you begin the transition to ICHRA, ask whether a move from group health insurance to ICHRA aligns with your business goals and workforce realities.
Here's some key factors to evaluate:
ICHRA allowance amount & budget control: With an ICHRA you set defined contribution levels rather than facing annual premium rate hikes from a group health plan.
Workforce demographics and employee classes: Do you have different employee types (remote vs onsite, salaried vs hourly, full‑time vs part‑time) that would benefit from more flexible contribution levels? ICHRA allows you to divide employees into classes for custom allowances.
Coverage and flexibility requirements: If your workforce values choice—such as selecting an individual health insurance plan tailored to them—ICHRA may be a good fit. By contrast, group health insurance tends to be one‑size‑fits‑all.
Participation and administrative complexity: Traditional group health plans often require minimum participation percentages and involve underwriting based on the group’s collective health risks. ICHRA generally avoids some of those burdens.
Example concern: A mid‑sized company with 200 employees across several states sees premiums rising 10% annually on their group plan. They desire flexibility for remote workers and want to offer varied allowances by region. For them, switching from traditional group coverage to an ICHRA could improve choice and budget predictability.
Comparing group health insurance and ICHRA
Understanding the difference between maintaining a group health insurance plan vs. the transition to ICHRA will help you articulate the value to stakeholders—and avoid pitfalls.
| Feature | Group Health Insurance | Transition to ICHRA (move from group health insurance to ICHRA) |
|---|---|---|
Cost and affordability | Premiums paid to carrier with annual rate hikes; unpredictable costs | Defined employer contribution; budget predictability and no rate hikes |
Employee choice and satisfaction | Limited plan options; uniform offering | Employees select individual ACA‑qualified plans; increased flexibility |
Participation requirements | Often minimums and uniform eligibility | ICHRA doesn’t require participation minimums; eligibility by employee class |
Administrative complexity | High: dealing with carriers, renewals, claims | Lower: focused on reimbursements and allowances, but new compliance responsibilities |
Customisation | Harder to tailor by class or geography | Easy to create different employee classes and vary allowance amounts |
Payroll/taxes | Premiums often pre‑tax via employer plan | Employer contributions reimbursed tax-free; employee uses individual plan; employee’s share of premium (if any) can be paid pre-tax for plans purchased off-Exchange |
Portability for employee | Coverage tied to employment and group plan | Employee’s individual plan is portable if they leave job; employer allowance may stop |
When you’re switching from group health insurance to ICHRA, emphasize to key stakeholders (finance, HR, executive leadership) the gains in budget control, flexibility, and employee choice—but also clearly call out the change in process and communication that will be required to make the transition successful.
Communicating the change to employees
Effective communication is critical when switching from group health to ICHRA. Employees will have lots of questions and uncertainty, especially if they’ve been used to the group health plan for years.
Key communication elements:
90‑day notice: Provide formal email notification at least 90 days before the group health plan ends and the ICHRA begins. This gives employees time to plan and understand.
Clear communication & FAQs: Produce an FAQ document explaining terms (e.g., ICHRA, individual health insurance premiums, special enrollment period, MEC) in plain language.
Employee kickoff call/webinar: Hold live or virtual sessions to walk employees through the transition, timeline, and what they need to do.
Multiple formats: Use formal email notifications, presentations, intranet posts, and training materials to ensure everyone receives the message.
Onboard and educate: Post‑launch, continue education through webinars, guides, and one‑on‑one sessions for those selecting individual coverage.
Common mistakes to avoid during the transition to ICHRA:
Assuming employees know what “individual health insurance plan” means and how to shop for one. Many do not.
Failing to explain the new timeline and key milestones: loss of group coverage → special enrollment period → choosing a plan.
Not providing support for employees who may have dependents or unusual medical needs and worry about coverage.
Best practice: Create a simple timeline graphic showing: group plan cancellation date → ICHRA effective date → special enrollment window → individual plan purchase deadline.
Assisting employees with individual coverage
A major shift when you move from group health insurance to ICHRA: employees now pick their own individual health insurance plans. You must support them.
What to help with:
Explain eligible individual health insurance plans: They must purchase an ACA‑qualified individual health plan (on or off‑exchange) that satisfies minimum essential coverage (MEC).
Loss of coverage documentation: If the group health plan ends, provide employees with proof of loss of coverage so they qualify for a special enrollment period (SEP).
Individual plan comparison tools: Provide decision‑support tools or connect employees with benefit advisors to help compare plan premiums, deductibles, networks, and out‑of‑pocket costs.
Premium payment solutions: Indicate how employer ICHRA allowance will work with individual plan premiums, whether reimbursed monthly or advanced.
Special enrollment period guidance: Clarify how the end of group health triggers a SEP and what timelines apply.
Summary of benefits templates: Offer simple “how to choose a plan” guides and checklists for employees.
Example scenario: Employee A has been on the group health PPO plan. Under the move from group health to ICHRA, they now receive a monthly allowance. They need help identifying which individual plan (Bronze vs Silver vs Gold) makes sense for their family situation and how to submit premium receipts for reimbursement. Benefit advisors or embedded tools can make this smoother.
Helping employees through this process increases participation and adoption, and reduces support burdens on HR.
Compliance and administrative considerations
Switching from group health to ICHRA introduces new administrative and regulatory responsibilities. Make sure you’re ready.
What to check:
Written plan document & SPD: An ICHRA must have a formal plan document and a Summary Plan Description (SPD).
Employee notices: Provide initial notice and ongoing notices to employees about eligibility, contribution amounts, and tax impacts.
Eligibility and employee classes: classes need to be properly structured in accordance with ICHRA rules. You cannot offer employees in the same class a group plan and an ICHRA.
Minimum essential coverage and affordability: For Applicable Large Employers (ALEs), affordability and MEC compliance still apply even with an ICHRA.
Carrier restrictions: Ensure employees choose individual plans that qualify for reimbursement under ICHRA rules. The ICHRA administrator should verify coverage before reimbursement.
Enrollment and recordkeeping: Maintain robust records of plan selections, individual policy verification, reimbursements, and communications.
Participation requirements: While group health plans may have participation minimums, ICHRA has more flexibility. Still, contributions should be designed to be compliant and competitive.
Common compliance pitfall: Cancelling the group plan but failing to coordinate the start date of the ICHRA, thereby creating a coverage gap or disenrolling employees improperly.
Ongoing support and adjustments
Once your move from group health to ICHRA is live, your work isn’t done. Ongoing monitoring and adjustments keep the plan effective.
Best practices:
Monitor usage and trends: Use dashboards to track participation, plan choices, and reimbursements.
Provide Q&A sessions and training: Hold periodic “office hours” for employees to ask questions about plan choices, reimbursements, or offboarding.
Review offboarding and new hire processes: When employees leave or join, make sure the ICHRA transitions properly (or ends) and reimbursement procedures are clear.
Renewal and benefit design review: Annually evaluate how the allowance and platform are performing. Make sure your ICHRA remains competitive and compliant.
Maintain written guides: Update employee guides, FAQs, and materials each year or when there are regulatory changes.
Supporting employees throughout strengthens trust in the benefit and ensures you capture the full value of switching to ICHRA.
Step‑by‑step process for how to switch from group health to ICHRA
Here’s a detailed process for a successful transition:
Evaluate suitability — review budget, workforce, classes, and find if the move from group health insurance to ICHRA fits.
Define cancellation and start dates — coordinate the cancellation date of your group health plan with the ICHRA start date to avoid gaps.
Select an ICHRA administrator solution — Choose a partner experienced in ICHRA rules (third‑party administrator or platform) to support compliance.
Design the ICHRA benefit — Set allowance amounts, define eligible employee classes, decide on premium-only or premium + other expenses.
Prepare legal documentation and plan design — Create the written plan document, SPD, SBC, and issue required notices.
Communicate the transition to employees — Launch your communication strategy (90‑day notice, kickoff calls, FAQs) so employees understand the change.
Assist employees with individual coverage — Provide tools, advisors, and clear instructions around plan shopping, SEP, and premium reimbursement.
Launch the ICHRA and process reimbursements — Ensure your payroll integration, reimbursement process, and verification of individual plans are operational.
Monitor and manage ongoing operations — Use data to refine allowances, classes, enrolment, and support resources.
By following these steps you’ll ensure you move smoothly from a group health plan to an ICHRA with minimal disruption and maximum benefit.
FAQ
What is the process for switching from group health to an ICHRA? The process includes assessing suitability, cancelling the group plan, designing the ICHRA benefit, communicating to employees, assisting employee individual plan enrollment, setting up reimbursements, and ongoing monitoring. See the full step‑by‑step guide above.
Can I offer both group health and ICHRA? Yes, but not for the same employee class. You must create distinct employee classes that either get the group health plan or the ICHRA to avoid overlap in a class and comply with federal rules.
What happens to employees when switching to an ICHRA? Employees will move from a group health plan to selecting their own individual plan. They receive an employer allowance, must choose an ACA‑qualified individual plan, and may need to submit proof of purchase and receipts for reimbursement. They’ll be supported through decision tools and benefit advisors to help navigate this new process.
Will employees lose coverage if I switch from group health to an ICHRA? Not necessarilyif timed correctly. The group health cancellation date should align with the ICHRA start date. Employees will use a special enrollment period (SEP) to buy an individual plan and then begin using the ICHRA allowance. Careful coordination avoids gaps.
How does compliance change when I move from group health insurance to an ICHRA? You’ll shift from carrier‑driven compliance to plan‑document and reimbursement tracking. You’ll need to issue notices (typically 90 days), maintain a written plan document, track employee classes, verify individual plan coverage, and monitor affordability/MEC rules if you’re an ALE.
Benefits transformed with ICHRA
If you’re considering how to switch from group health to ICHRA, you’re looking at more than just a benefits change; you’re transforming your approach to health coverage. The transition to an ICHRA offers better budget control, employee choice, and flexibility, but it demands thoughtful execution: clear communication, strong support for employees, compliant administration, and monitoring for ongoing success.
With the right preparation and the right partner, moving from group health insurance to an ICHRA can streamline your benefits, boost employee satisfaction, and give your organization a modern, future‑ready health benefits solution.
