How does an ICHRA work for business owners?
A business owner uses an ICHRA by setting a fixed monthly allowance in defined employee classes, and the ICHRA then reimburses each employee pre-tax for the individual ACA-compliant health insurance premium (and, if the plan allows, other qualified medical expenses) they buy on their own (HealthCare.gov — ICHRA).
Reviewed by Jason Burns, Editor & Steward · Last verified 2026-07-19
What it means
- The owner controls the budget by setting the allowance; the employee picks the plan.
- Sole owners without common-law employees generally cannot fund an ICHRA for themselves.
Action steps
- Adopt a written ICHRA plan document and 90-day employee notice.
- Verify each employee's individual coverage is ACA-compliant before reimbursing.
- Coordinate with payroll so reimbursements are excluded from taxable wages.
Risks & deadlines
- Owner-only businesses should confirm with a CPA whether an ICHRA or the self-employed health insurance deduction is the correct route.
Sources
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