"Which one is cheaper?" is the first question almost every business owner asks when they hear about ICHRA as an alternative to a traditional group health plan. The honest answer is that it depends — but not in a vague way. It depends on a handful of specific, knowable numbers: your current group premium, your employees' ages and home counties, and how much allowance you're willing to commit to. This guide breaks down where the real costs sit in each model so you can run that comparison for your own business instead of guessing.
Two different ways the money moves
With a traditional group plan, the business picks one plan (or a small menu of plans) from one carrier, pays a set premium per enrolled employee, and typically covers some percentage of that premium — the rest is payroll-deducted from the employee. The carrier prices the group as a whole, and that price is revisited — usually upward — at every annual renewal.
With an ICHRA, the business sets a fixed monthly allowance per employee (or per employee class) and reimburses employees, tax-free, for the individual health plan each one buys on their own — usually through the ACA Marketplace. The employer's cost is the allowance itself, full stop. It doesn't move unless the employer decides to change it.
Line-by-line cost comparison
| Cost driver | ICHRA | Traditional group plan |
|---|---|---|
| Monthly cost to employer | Fixed allowance, employer-controlled | Set by carrier's group rate |
| Renewal risk | None — you set next year's allowance | Rates can rise significantly year to year |
| Admin & broker fees | Minimal ongoing admin per employee | Group renewals, census updates, carrier negotiations |
| Cost if headcount changes | Scales cleanly — add/remove allowance per person | Can affect group rating and participation minimums |
| Employee's out-of-pocket exposure | Varies by the plan they choose | Fixed employee premium share, set by the plan menu |
| Best for | Predictable budgets, scattered or remote teams | Teams wanting one uniform plan and network |
Where ICHRA tends to save money
- No renewal shock. Group premiums are re-rated annually based on the group's claims and the market — a bad renewal year can mean a double-digit increase with no warning. An ICHRA allowance only changes when you decide to change it.
- No participation minimums to protect. Some group plans require a minimum share of eligible employees to enroll, which can push a business toward richer (and pricier) plans just to hit the threshold. ICHRA has no such requirement.
- Employees with subsidy-eligible income may cost you less. Lower-income employees who'd qualify for ACA premium tax credits on their own may find a Marketplace plan that costs less than your allowance — though accepting the ICHRA offer generally makes them ineligible for that subsidy, so this needs to be weighed carefully per employee.
Where a traditional group plan can still win
- Large, healthy groups sometimes get favorable group rates that beat what individual-market plans cost per person in that area — this varies a lot by state and county.
- Employees who value one shared network and one simple enrollment may see more value in a group plan's simplicity than in comparison-shopping their own individual plan every year.
- Some employees lose eligibility for ACA subsidies once an ICHRA offer is on the table, which can raise their net cost even if your allowance is generous.
Want your actual numbers, not a rule of thumb?
We'll compare your current group renewal against a real ICHRA allowance scenario for your team — free, no pressure.
Get my free cost comparisonHow to run this comparison for your own business
- Pull your current group renewal numbers. Total monthly premium, employer contribution percentage, and any admin or broker fees.
- Estimate individual-market pricing for your team. Individual plan costs vary by age, county, and household size — a licensed agent can run real quotes rather than a national average.
- Set a candidate allowance and compare its total monthly cost against your current group spend, per employee and in aggregate.
- Check the affordability rule if you're an applicable large employer — an ICHRA allowance considered "affordable" under IRS rules can help satisfy the employer mandate; an allowance that's too low may not.
How Honorbrook helps
We run this comparison for businesses regularly, and it only takes real numbers — your current group renewal and a rough sense of your team's ages and locations. We'll model an ICHRA allowance scenario next to your existing group plan, flag any affordability concerns, and help you decide with actual dollar figures instead of a guess. If ICHRA turns out not to be the right fit, we also compare traditional group and SHOP options side by side. It's free either way, and we're licensed across Virginia, Maryland, Georgia, Texas, Michigan, North Carolina, South Carolina, Alabama, Louisiana, Indiana, and West Virginia.
Availability and rules vary by state
Health plans, premiums, enrollment rules and state programs differ by state and sometimes by county, and a given plan may not be available in every state. Honorbrook is licensed in the 11 states below; what we can offer you depends on what carriers sell where you live. Each state’s insurance regulator can verify an agent’s license and answer consumer questions.
- Virginia: Virginia Bureau of Insurance
- Maryland: Maryland Insurance Administration
- North Carolina: North Carolina Department of Insurance
- South Carolina: South Carolina Department of Insurance
- Georgia: Georgia Office of Insurance and Safety Fire Commissioner
- Alabama: Alabama Department of Insurance
- Louisiana: Louisiana Department of Insurance
- Texas: Texas Department of Insurance
- Michigan: Michigan Department of Insurance and Financial Services
- Indiana: Indiana Department of Insurance
- West Virginia: West Virginia Offices of the Insurance Commissioner