An Individual Coverage Health Reimbursement Arrangement (ICHRA) lets a Florida business reimburse employees tax-free for the individual ACA plans they buy themselves, instead of sponsoring one group plan for everyone. For employers tired of double-digit group renewals and rigid plan designs, the appeal is simple: you set a fixed dollar contribution, and your healthcare budget stops being a moving target.
ICHRAs were created by federal rule in 2020 and have grown quickly among small employers — and they fit Florida especially well, because every county runs on the HealthCare.gov individual marketplace, giving employees a genuine menu of plans to spend their reimbursement on. This guide covers how an ICHRA works, the 2026 numbers that matter, and how to set one up.
Florida's particular mix makes the ICHRA worth a serious look: the state has no income tax, so the tax-free nature of reimbursements is pure savings with no state-level offset; its small businesses skew toward hospitality, construction, and seasonal work that fits poorly into one rigid group plan; and its workforce is spread across 67 separate county rating areas, so a single group network rarely serves everyone equally. An ICHRA lets each employee buy the plan that works where they live while the employer keeps a flat, predictable cost.
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How an ICHRA Works
With an ICHRA, the employer defines a monthly reimbursement amount; the employee buys an individual ACA plan; and the employer reimburses the premium (and optionally other medical costs) tax-free up to the set amount. There is no carrier-imposed participation requirement and no minimum or maximum contribution — the employer decides what to fund. Reimbursements are exempt from payroll tax for both the business and the employee, and unused amounts stay with the employer.
The key rule is that an employee covered by an ICHRA must be enrolled in a qualifying individual health plan, and the same class of employees cannot be offered a choice between the ICHRA and a traditional group plan. You can, however, offer a group plan to one class and an ICHRA to another.
The 2026 Affordability Rule
For 2026, an ICHRA offer is considered 'affordable' if the employee's cost for the lowest-cost silver plan in their area, after subtracting your ICHRA contribution, is no more than 9.96% of household income. That percentage rose sharply from 9.02% in 2025, which means a given contribution stretches further toward affordability in 2026. Affordability only matters in two situations: if you are an applicable large employer (50+ full-time-equivalent employees) subject to the mandate, or if you want to be sure an employee is not better off declining the ICHRA for a subsidy. Because employers rarely know household income, the IRS allows Federal Poverty Level, Rate of Pay, and W-2 safe harbors to test affordability.
One consequence to plan around: if your ICHRA is affordable, the employee cannot also claim a premium tax credit on the marketplace. For lower-wage Florida workers who would qualify for large subsidies, that tradeoff deserves a close look before you set the contribution.
Thinking about an ICHRA for your Florida business? A licensed producer can model contribution levels and the 2026 affordability test for you — no cost.
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ICHRAs let you divide your workforce into permitted classes — such as full-time, part-time, seasonal, salaried versus hourly, or by geographic rating area — and set a different contribution for each class (within non-discrimination rules). This class flexibility is what makes ICHRAs so useful for Florida's many hospitality, seasonal, and multi-location small businesses, which struggle to fit a single group plan to a varied workforce.
How to Set Up an ICHRA in Florida
- Decide classes and contributions. Choose which employee classes you will cover and how much to reimburse each, monthly.
- Set an effective date and give notice. Employees must receive an ICHRA notice at least 90 days before the plan year (or by the start date for new hires).
- Adopt a written plan document. Required for compliance; most employers use an ICHRA administrator to handle documents and reimbursements.
- Help employees enroll. Employees buy individual ACA plans; offering an ICHRA opens a special enrollment period for them.
- Reimburse tax-free. Employees submit proof of coverage and premiums; you reimburse up to the class amount.
ICHRA Pros and Cons for Florida Employers
The advantages that draw Florida small businesses to ICHRAs are real: a fixed, predictable budget instead of unpredictable group renewals; no participation requirement, so it works even if only a few employees enroll; tax-free reimbursements for both sides; and the freedom for each employee to pick the plan and network that fits their own family. For multi-location Florida employers — say a company with staff in both Miami-Dade and Hillsborough rating areas — an ICHRA sidesteps the problem of fitting one group network across very different markets.
The tradeoffs are worth naming too. Employees take on the task of shopping the marketplace, which some find unfamiliar; an affordable ICHRA disqualifies workers from premium tax credits, which can hurt lower-wage staff; and there is a compliance layer — plan documents, notices, and substantiation — that most employers outsource to an administrator. For many Florida businesses the budget control and flexibility outweigh these, but the fit depends on your workforce.
Frequently Asked Questions
What is the ICHRA affordability percentage for 2026?
For 2026 an ICHRA is affordable if the employee's cost for the lowest-cost silver plan, after your contribution, is no more than 9.96% of household income — up from 9.02% in 2025. The IRS permits Federal Poverty Level, Rate of Pay, and W-2 safe harbors so employers can test affordability without knowing actual household income.
Is there a minimum or maximum ICHRA contribution?
No. Unlike a QSEHRA, an ICHRA has no IRS-set dollar cap and no minimum — the employer decides how much to reimburse each employee class. The only limit is that reimbursements must be for documented health coverage and medical costs, and the offer must be uniform within each permitted class.
Can a Florida small business with under 50 employees offer an ICHRA?
Yes. Businesses of any size can offer an ICHRA, including the smallest Florida employers. For employers under 50 full-time-equivalent employees, affordability is not mandatory, but it still determines whether an employee should keep a marketplace subsidy instead of the ICHRA.
Can employees keep their ACA subsidy with an ICHRA?
Only if the ICHRA is considered unaffordable for them. If your ICHRA offer is affordable under the 2026 9.96% rule, the employee must use the ICHRA and cannot also claim a premium tax credit. If it is unaffordable, the employee may choose either the ICHRA or the subsidy — but not both.
Are ICHRA reimbursements subject to Florida payroll taxes?
No. Qualified ICHRA reimbursements for individual coverage and eligible medical expenses are exempt from federal payroll and income tax for both the employer and employee. Florida has no state income tax, so there is no additional state-level tax on reimbursements either, which makes the after-tax value of an ICHRA dollar especially strong for Florida employers.
Related reading: Gulf Coast small business health plans, our Florida group health insurance requirements guide, and ICHRA for Florida small business. For individual options, see Sunstate Coverage.