ICHRA in North Carolina: Employer Guide to Individual Coverage HRA

For many small businesses, offering health insurance can feel difficult to manage. Traditional group plans may involve rising premiums, limited plan choices, participation requirements, and significant administrative work.

An Individual Coverage Health Reimbursement Arrangement, commonly called an ICHRA, offers another approach. Instead of purchasing one group health plan for everyone, an employer provides a defined reimbursement allowance that employees can use toward their own individual health insurance premiums and other eligible medical expenses.

For employers in Jacksonville, Wilmington, New Bern, and throughout Eastern North Carolina, an ICHRA may provide more flexibility while still helping employees access meaningful health coverage.

What Is an ICHRA?

An ICHRA is an employer-funded health benefit arrangement. The employer sets aside a specific amount of money that eligible employees can use to reimburse qualified medical expenses.

Unlike a traditional group health plan:

• The employer does not select one health plan for the entire workforce.
• Employees generally choose their own individual health insurance plans.
• The employer sets the reimbursement amount and eligibility rules.
• Reimbursements may be tax-free when the arrangement is properly designed and administered.
• Employees must maintain qualifying individual health insurance coverage or Medicare to receive reimbursements.

Eligible coverage may include:

• An individual Marketplace health plan
• An individual plan purchased directly from an insurance carrier
• Medicare Parts A and B
• Medicare Advantage, also known as Medicare Part C

Short-term plans, limited-benefit policies, dental coverage, and vision-only coverage generally do not satisfy the individual coverage requirement for an ICHRA.

The Centers for Medicare & Medicaid Services provides additional information through its official ICHRA employer guidance.

How Does an ICHRA Work?

The basic process is straightforward, although the plan must be structured and administered carefully.

Step 1: The employer designs the benefit

You decide:

• Which employees are eligible
• How much the business will contribute
• Whether dependents may use the benefit
• The plan year and effective date
• Which expenses qualify for reimbursement
• Whether different employee classes will receive different allowances

Federal rules allow employers to use certain employee classifications, such as:

• Full-time or part-time status
• Salaried or hourly status
• Seasonal employees
• Employees in different geographic locations
• Employees covered by a collective bargaining agreement
• Employees who have completed a waiting period

You cannot create completely custom classes based on individual preferences. The available classifications must follow federal rules, and employees within the same class generally must receive the benefit on the same terms.

Step 2: Employees receive the required notice

Employees generally must receive a written ICHRA notice at least 90 days before the beginning of the plan year. Newly eligible employees must receive the notice no later than the date their ICHRA coverage can begin.

The notice should explain:

• The reimbursement amount
• The ICHRA start and end dates
• Who is eligible
• Whether dependents are included
• The requirement to maintain qualifying coverage
• How the arrangement may affect Marketplace tax credits
• How employees can obtain additional information

Step 3: Employees choose individual coverage

Employees review individual health insurance options available in their location. They may compare plans through HealthCare.gov or purchase coverage outside the Marketplace when appropriate.

Employees should consider more than the monthly premium. Important factors include:

• Provider networks
• Prescription coverage
• Deductibles
• Copayments and coinsurance
• Maximum out-of-pocket costs
• Coverage for doctors and hospitals they already use
• Whether dependents need separate plans

An employee in Jacksonville may have different plan options and premiums than an employee in Wilmington or New Bern. Individual plans are based partly on the employee’s location, age, household size, and selected coverage.

Step 4: Employees submit reimbursement requests

After enrolling in qualifying coverage, employees submit proof of coverage and eligible expenses according to the plan’s procedures.

Depending on the ICHRA design, reimbursements may apply to:

• Individual health insurance premiums
• Medicare premiums
• Deductibles
• Copayments
• Coinsurance
• Other qualified medical expenses

The employer or plan administrator must use reasonable procedures to verify that employees and covered dependents maintain qualifying coverage.

Step 5: The employer reimburses eligible expenses

The employee pays the insurance premium or eligible expense and submits the required documentation. The ICHRA then reimburses the employee up to the available allowance.

Employers do not generally have to reimburse the entire premium. For example, if an employee receives a $400 monthly allowance and has a $550 monthly premium, the employee may be responsible for the remaining $150, depending on the plan’s terms.

ICHRA vs. Traditional Group Health Insurance

An ICHRA is not automatically better than a traditional group plan. The right choice depends on your workforce, budget, goals, and administrative preferences.

Pros of an ICHRA

An ICHRA may offer several advantages:

• Predictable budgeting: You decide the reimbursement amount instead of accepting an unpredictable group renewal.
• Employee choice: Employees can select coverage that fits their providers, prescriptions, and family needs.
• Potentially easier access for small businesses: Employers of various sizes may offer an ICHRA if federal requirements are met.
• Support for different workforces: An ICHRA may work well for businesses with part-time, full-time, seasonal, or geographically dispersed employees.
• Recruitment value: A health benefit can help your business compete for employees in a tight labor market.
• Flexibility: Employers may design different allowances for permitted employee classes.

Cons of an ICHRA

There are also important considerations:

• Employees must understand individual insurance: Some employees may need help comparing plans and networks.
• Marketplace tax credits can be affected: An affordable ICHRA may make an employee and eligible household members ineligible for premium tax credits.
• Compliance responsibilities remain: Notices, eligibility rules, documentation, and substantiation must be handled correctly.
• Employees may have different plans: This can make benefits education more involved.
• Plan availability varies: Individual plan choices differ by county and rating area in North Carolina.

What Does “Affordable” Mean for a 2026 ICHRA?

Affordability is especially important for employers with 50 or more full-time employees, known as applicable large employers under the Affordable Care Act.

For 2026, an ICHRA is generally considered affordable when the employee’s monthly cost for the self-only lowest-cost Silver plan in their area, after the employer reimbursement, is no more than 9.96% of one-twelfth of the employee’s household income.

In simplified form:

Lowest-cost Silver plan premium − monthly ICHRA allowance ≤ 9.96% of monthly household income

The calculation may involve employee age, location, household income, and the amount offered by the employer. CMS publishes ICHRA lowest-cost Silver plan premium resources, and employers may also use approved affordability tools.

If an ICHRA is considered affordable:

• The employee generally cannot receive a Marketplace premium tax credit.
• Eligible household members may also be affected if the offer extends to them.
• The employee may still choose whether to accept the ICHRA, but declining an affordable offer does not generally restore eligibility for a premium tax credit.

If an ICHRA is not affordable, an employee may have a choice between using the ICHRA or declining it and applying for a Marketplace premium tax credit if otherwise eligible. Employees cannot use both benefits for the same coverage period.

Because tax-credit rules can be complicated, employers should coordinate with a qualified benefits professional and tax advisor before finalizing the contribution design.

When Does an ICHRA Make Sense for a North Carolina Employer?

An ICHRA may be worth considering when:

• Traditional group plan renewals have become difficult to budget.
• Your employees live in several North Carolina communities.
• Your workforce includes both full-time and part-time employees.
• Employees have different doctors, prescriptions, or family coverage needs.
• You want to offer a health benefit without selecting one plan for everyone.
• You are a small business competing with larger employers for talent.
• You want to establish a defined contribution strategy.

For example, a growing business in Wilmington may have employees with different household situations and provider preferences. A contractor in Jacksonville may have a mix of full-time and seasonal workers. A professional office in New Bern may want to offer health benefits while maintaining a predictable annual budget.

In each case, the plan design should reflect the employer’s workforce rather than relying on a one-size-fits-all approach.

How Bartley Insurance Services Helps

Setting up an ICHRA involves more than choosing a reimbursement amount. Bartley Insurance Services helps Eastern North Carolina employers evaluate the arrangement and coordinate the key steps.

Our support may include:

• Reviewing your current benefits strategy: We look at your existing group coverage, employee demographics, budget, and benefit goals.
• Comparing ICHRA and group-plan options: An ICHRA may not be the right fit for every business. We help you understand the practical differences.
• Designing employee classes and allowances: We help you review permitted employee categories and create a reimbursement approach that fits your workforce.
• Explaining individual plan choices: Employees need clear guidance on networks, premiums, deductibles, and coverage options.
• Coordinating enrollment education: We help employees understand how to use their ICHRA, what documentation is required, and when they must enroll.
• Supporting ongoing reviews: Business needs, employee populations, and insurance markets change. Regular reviews help keep your benefit strategy aligned with your goals.

You can also review Bartley Insurance Services’ guidance on group employer benefits and small-business insurance consulting.

Next Steps for Employers Considering an ICHRA

Before offering an ICHRA, consider the following checklist:

1. Review your current group health plan and renewal costs.
2. Identify your employee classes and geographic locations.
3. Determine a sustainable monthly or annual reimbursement budget.
4. Decide whether dependents will be eligible.
5. Review affordability requirements for 2026.
6. Prepare the required employee notice.
7. Establish coverage verification and reimbursement procedures.
8. Explain how the offer may affect Marketplace tax credits.
9. Give employees enough time to compare and enroll in individual coverage.
10. Coordinate with your tax and compliance professionals.

An ICHRA can be a practical alternative to traditional group health insurance, particularly for small and growing employers that want more control over their benefits budget. However, the arrangement must be designed carefully, and employees need clear guidance throughout the process.

If you are considering an ICHRA for your Jacksonville, Wilmington, New Bern, or Eastern North Carolina business, contact Bartley Insurance Services for a personalized benefits review. We can help you compare your options, understand the requirements, and determine whether an ICHRA fits your business and employees.

Contact Bartley Insurance Services or call (910) 346-2170 to get started.