Your Small Business Health Insurance Renewal Just Doubled. Here’s What ICHRA Actually Fixes.
Your group health renewal came in, and the number is almost unrecognizable. A 13-person dental practice recently shared that their premiums jumped from $4,900 a month to $12,000 — a 300% increase in a single year. They are not alone. Small employers across multiple states are facing renewal shock that forces an impossible choice: absorb costs that crush margins, shift the burden to employees, or drop coverage entirely.
There is another option that has been quietly gaining traction.
What is an ICHRA, and how does it help a small business?
ICHRA stands for Individual Coverage Health Reimbursement Arrangement. It is a defined-contribution benefit that lets an employer set a fixed monthly dollar amount to reimburse employees for individual health insurance premiums and qualified medical expenses.
Instead of purchasing a group health plan and negotiating renewal rates each year — which is what produces the shock in the first place — you decide what your business can comfortably afford to spend per employee. Your employees then go to the individual market and choose their own plans. You reimburse what they spend, up to your set amount.
The premium risk shifts away from your business. Your cost is what you set it at. If you allocate $500 per employee per month, that is what you spend — not a dollar more. That predictability is the main reason employers are looking at ICHRAs as a small-business health insurance solution.
How does an ICHRA work for a small team?
The mechanics are straightforward.
Step 1: Decide your budget. You set a monthly reimbursement amount per employee class. Classes can be differentiated by full-time, part-time, salaried, or hourly — but within each class, the offer must be uniform. Your licensed benefits advisor helps you structure this correctly.
Step 2: Employees choose their own plans. Each employee goes to the individual marketplace and selects a plan that fits their situation — a 28-year-old single employee has different requirements than a 55-year-old with a family. No one is locked into a single network or plan design chosen by the employer.
Step 3: Employees submit proof of coverage. Employees show they have an individual coverage plan in place and submit qualified medical expenses.
Step 4: You reimburse, tax-free. Reimbursements up to your set amount are tax-free to the employee and tax-deductible to the business — a meaningful advantage over group plan contributions, which carry payroll tax implications.
The whole process runs through a third-party administrator who handles compliance, documentation, and reimbursement logistics. You do not need to build an internal system for this.
Why are more small businesses choosing ICHRAs over group health plans?
Cost predictability. With a group plan, you are guessing what next year’s renewal will bring. With an ICHRA, you decide your budget at the start of the year and it stays there. The dental practice that saw premiums jump to $12,000 a month? An ICHRA lets them set their number — say, $600 per employee per month — and know exactly what they are spending for the year.
Simplicity for small teams. A group plan requires administration, carrier negotiations, and annual renewal management. An ICHRA outsources much of that complexity to a third-party administrator. For a 10- or 20-person practice, that simplification frees the business owner to focus on running the business.
Broader plan access for employees. Group plans are limited to whatever the carrier offers in your area. Individual market plans vary by location, carrier, and tier. Employees with different health needs can each find a plan that suits them — a single parent may prioritize a low deductible; a healthy young employee may prefer a lower premium with a higher deductible.
What about ACA compliance?
A common question. If you have fewer than 50 full-time equivalent employees, you are not subject to the employer mandate — meaning there is no ACA penalty for not offering group coverage. An ICHRA satisfies the employer mandate for applicable large employers as well, because it is considered affordable coverage when the reimbursement amount meets the affordability threshold.
For small employers under 50, the ICHRA gives you a compliant way to provide a meaningful health benefit without the operational burden of a group plan. The rules around employee classes and required disclosures are specific — working with a licensed advisor who understands ICHRA regulations ensures you stay compliant.
How Trek Insurance Solutions approaches ICHRAs
At Trek Insurance Solutions, we work with small businesses facing premium pressure. Our team reviews your current benefits structure, your workforce demographics, and your budget — then helps you evaluate whether an ICHRA is the right path forward.
We are licensed in multiple states, and our advisors understand the individual market landscape in the areas where your employees live and work. That local knowledge matters — individual plan availability, carrier networks, and pricing vary from one area to another.
We also help with ongoing administration. An ICHRA is not a set-it-and-forget-it arrangement. Employees need to be onboarded, enrolled in individual plans, and supported through the reimbursement process. Our team makes that transition smooth for both the business and its employees.
If your renewal just came in and the number is uncomfortable, you do not have to absorb it, pass it along, or drop coverage. An ICHRA may be the path forward your business has been looking for.
Ready to explore what an ICHRA could look like for your business? Contact Trek Insurance Solutions at 888-960-0442 or visit trekis.net to schedule a consultation. We will walk you through your options with no pressure and no obligation — just honest guidance to help you make the right decision for your team.