ICHRA vs traditional group health plans: what does administration software have to do?
With a traditional group health plan, the employer buys coverage from a carrier or self-funds it, and the software moves enrollment to the plan and premiums back. With an individual coverage HRA, employees buy their own individual coverage and the employer reimburses them, so the software has to enforce class rules, prove coverage and pay requests every month.
How does administering an ICHRA differ from a group health plan?
Quick answer
ICHRA vs traditional group health plans changes what administration software does: a group plan needs 834 enrollment and premium billing with a carrier, while an ICHRA needs employee classes, 90-day notices, proof of individual coverage and monthly reimbursement. Agnotic Technologies builds either module for benefits platforms and TPAs, without giving plan or tax advice.
| Criterion | Group health plan | ICHRA |
|---|---|---|
| Plan setup | Employer contracts with a carrier, or self-funds with a TPA | Employer sets an HRA amount per class; employees choose individual coverage |
| Eligibility | Rules in the plan document | Classes defined before each plan year; same terms within a class, with permitted variation by age and number of dependents |
| Offering both | Not applicable | A class offered an ICHRA cannot also be offered a traditional group plan |
| Notice timing | Group plan notices and documents | Written notice at least 90 calendar days before each plan year for existing participants |
| Enrollment | X12 834 enrollment and changes to the carrier or TPA | Opt in or opt out once per plan year, plus enrollment in individual coverage |
| Proof of coverage | The carrier confirms coverage | Substantiation by the plan year start, then with each reimbursement request |
| Affordability input | The employee's share of the premium for the plan offered | Lowest cost silver plan premium in the employee's rating area, less the monthly HRA amount |
| Monthly money movement | Premium billing and payment between employer and carrier | Reimbursements to employees after each substantiated request |
| Data exchanged | 834 enrollment and premium data | Coverage documents, attestations, reimbursement requests and receipts |
| Special enrollment | Group plan special enrollment events | Newly gaining access to an ICHRA triggers an individual market special enrollment period |
What they are
What is Group health plan
A traditional group health plan gives employees coverage under one employer plan, insured by a carrier or self-funded with a third party administrator. Plan design, eligibility and claims live with the carrier or TPA; the employer side of the software handles enrollment, changes and premium billing.
What is ICHRA
An individual coverage HRA is an account-based group health plan that reimburses employees for individual health insurance and medical care expenses, up to an amount the employer sets for each class of employees. Employees buy their own individual coverage, and the HRA must check that they keep it.
Key differences
How do employee classes and the same-terms rule shape the data model?
Under 26 CFR 54.9802-4, a plan sponsor that offers an individual coverage HRA to a class of employees must offer it on the same terms to everyone in that class, may not also offer that class a traditional group health plan, and must decide its classes and their definitions before each plan year. The software needs classes as versioned, dated records, an allowance table per class, and checks that stop a class from holding both offers.
Which variations are allowed inside a class?
The same rule permits the maximum amount to rise with the number of covered dependents, and with age, as long as the oldest participant's amount is not more than three times the youngest participant's. Store the formula, not just the result, so an auditor can see why two employees in one class received different amounts.
What does coverage substantiation require from the software?
The HRA must have reasonable procedures to substantiate that participants and covered dependents are enrolled in individual coverage for the plan year, generally by the first day of the plan year. Proof can be a document from a third party, such as an insurance card or an Exchange record, or a participant attestation. After that, each reimbursement request needs substantiation that coverage continues for the month the expense was incurred, which can be an attestation on the request form.
When must the ICHRA notice go out?
The HRA must give each participant a written notice at least 90 calendar days before the start of each plan year, with later dates for people who become eligible after that. The notice covers items such as the right to opt out and the potential availability of the premium tax credit. Build the notice as a scheduled, tracked job per participant, with proof of delivery.
How is ICHRA affordability calculated?
Under 26 CFR 1.36B-2(c)(5), an individual coverage HRA is affordable for a month if the employee's required HRA contribution, the lowest cost silver plan premium for self-only coverage in the employee's rating area less the monthly self-only HRA amount, does not exceed one twelfth of household income times the required contribution percentage. The software needs rating area by employee address and the right premium data to run it.
What stays the same as group plan administration?
The employer still needs eligibility data, terminations, life events and reporting. For group plans, HIPAA adopts the X12 834 for enrollment and disenrollment in a health plan (45 CFR 162.1502), so carrier and TPA feeds keep running. Platforms serving both kinds of employer share the employee, employer and event model and diverge at plan setup and money movement.
When to use each
When to use Traditional group health plan
- Your platform serves employers that sponsor insured or self-funded group plans.
- You exchange enrollment with carriers or TPAs and reconcile premium bills.
- Plan eligibility follows the plan document rather than employee classes.
When to use Individual coverage HRA (ICHRA)
- Your platform administers HRAs for employers that fund individual coverage.
- You need class-based allowances, notices, opt-outs and substantiation.
- Money moves as reimbursements to employees, not as premiums to one carrier.
What should an ICHRA administration module include?
1. Class definitions per plan year, versioned and locked before the year starts, with a check that no class holds both an ICHRA and a group plan.
2. Allowance rules per class, including dependent and age variations stored as formulas.
3. A notice scheduler that sends the 90-day notice and later notices for new eligibles, and records delivery.
4. Opt-in and opt-out capture once per plan year, with the date and the participant's choice.
5. Annual substantiation by document upload or attestation, with dates and reviewers.
6. Monthly substantiation on each reimbursement request, plus a rule that stops payment for months without coverage.
7. Reimbursement workflow: request, receipt check, approval, payment and remittance record.
8. Affordability inputs: employee address, rating area and premium data, kept with the date they were used.
9. Coverage end handling: when individual coverage ends, stop reimbursing later expenses and handle forfeiture as the rule requires.
10. An audit trail for every class, allowance, notice, attestation and payment.
Which sources does this comparison rely on?
- 26 CFR 54.9802-4: individual coverage HRAs, classes, same terms, substantiation and notice (eCFR)
- 26 CFR 1.36B-2(c)(5): affordable HRA for premium tax credit purposes (eCFR)
- 45 CFR 155.420(d)(14): special enrollment period on gaining an individual coverage HRA (eCFR)
- 45 CFR 162.1502: X12 834 standard for enrollment and disenrollment (eCFR)