Can You Use Your ICHRA for Medicare?
Key Takeaways
- In an Individual Coverage Health Reimbursement Arrangement (ICHRA), a business contributes to help workers pay for their own health insurance.
- An ICHRA can be used to purchase a plan from the Healthcare.gov marketplace, but it can also be used with Original Medicare or Medicare Advantage.
- ICHRA funds may be applied to monthly premiums and other qualified medical expenses.
An increasing number of companies are offering employees a Health Reimbursement Arrangement (HRA), an account-based health plan that can either supplement or substitute for an employer-sponsored group health insurance policy. An HRA gives participants a set amount of tax-free funds to reimburse them for qualifying healthcare expenses.
An Individual Coverage Health Reimbursement Arrangement (ICHRA) is available to businesses of all sizes. The employer contributes a tax-free allowance to help workers pay for their own health insurance. For the employer, this can be a way to provide benefits at a predictable expense, complying with the employer mandate in the Affordable Care Act (ACA, also known as Obamacare). Meanwhile, employees get more freedom to choose the coverage that’s best for them.
People who qualify for public health insurance through Medicare may still be working for an employer that offers an ICHRA. They can use those untaxed funds to pay for monthly premiums and certain other costs. Let’s look at a few different ways that an ICHRA can work with either Original Medicare or a Medicare Advantage plan.
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What Is an ICHRA?
After Congress passed the 21st Century Cures Act in 2016, businesses with fewer than 50 full-time employees were able to offer a Qualified Small Employer Health Reimbursement Arrangement (QSEHRA). The QSEHRA was specifically designed so smaller employers that did not offer group policies could give workers untaxed dollars to spend on health insurance that met the ACA’s standards for minimum essential coverage.
A few years later, federal agencies created the ICHRA as a more flexible option that fueled wider adoption by businesses. Advocacy group the HRA Council estimated that over 500,000 people had HRA coverage as of 2025.
Employees can use an ICHRA to apply a set amount of untaxed dollars toward their own insurance, purchasing a policy directly from a private carrier or through the Healthcare.gov marketplace. The minimum amount for an HRA allowance is based on the monthly cost of a plan in your area that’s rated at the silver level in the marketplace.
People who qualify for Medicare have additional options for using HRA funds.
How an ICHRA Works With Original Medicare
U.S. citizens and permanent residents who are over 65 or have certain disabilities are eligible for Original Medicare, a federally administered public health insurance program. To use ICHRA funds from your job to help pay for Medicare, you must first enroll in both Medicare Part A, which is hospital insurance, and Part B, which is medical insurance, to meet the minimal coverage requirements. While most people don’t pay a premium for Part A, ICHRA can be used for the monthly Part B premium.
HRA dollars can be applied to other qualified medical expenses like the Part A and Part B deductibles, which you must pay before your coverage kicks in, as well as the coinsurance or copays for covered services.
Original Medicare generally covers medications that are administered in a medical setting like your doctor’s office, but not drugs you take at home. You have the option to add a Medicare Part D prescription drug plan from a private insurance carrier. You can also choose to enroll in a Medicare Supplement plan (also called Medigap), which helps with out-of-pocket expenses. Your ICHRA can contribute to pay for both Part D and Medicare Supplement premiums.
We’re here to help you find the right plan for your needs.
How an ICHRA Works With Medicare Advantage Plans
Medicare Advantage (also called Medicare Part C) plans are offered by private insurance carriers to substitute for Original Medicare. Plans must at least match the coverage you’d get from Parts A and B, but they may offer additional benefits. For example, Medicare Advantage Prescription Drug plans include Medicare Part D coverage.
To join a Medicare Advantage plan, you must first enroll in both Medicare Part A and Part B and then switch. If your employer offers an ICHRA, you can use those funds toward the costs of your plan, which may include monthly premiums, an annual deductible, and copays or coinsurance for services, all of which vary by plan. Medicare Advantage plan availability depends on where you live, and for the fullest coverage, you will need to visit healthcare providers, pharmacies, and facilities that are in your network.
If your employer offers an ICHRA and you qualify for Medicare, explore your coverage options to make sure you’re getting the most out of your plan.
Sources
More employers adopting ICHRAs, giving workers money to buy their own health insurance. AP.
Growth Trends for ICHRA & QSEHRA. HRA Council.
So What’s the Deal with ICHRA? MedCity News.