ICHRA Eligibility Rules for Business Owners | Vitable Health

ICHRA

Brokers & Consultants

For Employers

Table of Contents

ICHRA vs. traditional group health: key differences Which types of business owners can participate in an ICHRA? Why do these restrictions exist? Options for business owners ineligible for ICHRA Conclusion

Related Blogs

\ Introducing ACA Autopilot: Fully Managed ACA Compliance for Employers with Hourly Workers](/content/blogs/aca-autopilot-managed-aca-compliance/index.html)

\ Self-Funded vs. Fully Insured Health Plans: What Employers Need to Know](/content/blogs/self-funded-vs-fully-insured-health-plans/index.html)

\ What happens when your home care agency is audited for ACA compliance by the IRS?](/content/blogs/what-happens-when-your-home-care-agency-is-audited-for-aca-compliance-by-the-irs/index.html)

.avif)\ Affordable Care Act FAQs for Home Care Agencies](/content/blogs/affordable-care-act-faqs-for-home-care-agencies/index.html)

%20(1).avif)\ What We Learned from the 2025 Small Business Benefits Index](/content/blogs/2025-small-business-benefits-index/index.html)

written by

Katherine Torres

Read:

6

mins

The individual coverage health reimbursement arrangement (ICHRA) is a modern way for employers to offer health benefits.

As more groups implement this alternative to group health policies, some business owners wonder if they can participate in their company’s ICHRA alongside their employees. The answer depends on IRS rules related to your business structure and owner status.

In this article, we’ll cover the following:

ICHRA vs. traditional group health: key differences

An ICHRA is not a health insurance policy itself. Instead, it’s an employer-funded arrangement that covers the cost of employees’ own individual insurance premiums and (optionally) other medical expenses. Listed below are some key differences between this benefit and a group health insurance policy:

Even though an ICHRA is not a health insurance policy, it is still considered a formal employee benefit plan and is impacted by federal laws like the Employee Retirement Income Security Act (ERISA) and the Affordable Care Act (ACA). The laws that govern ICHRAs also impact which types of business owners can participate in the benefit.

Which types of business owners can participate in an ICHRA?

ICHRA eligibility for owners depends on whether the owner can be classified as an employee of the business. The IRS stipulates that HRA benefits (including ICHRAs) can be provided tax-free only to current or former employees and their families1. Owners who are considered “self-employed” or otherwise not considered employees may not participate in an ICHRA. Here’s how that impacts each type of business owner:

Why do these restrictions exist?

Why are owners of S-corps, partnerships, and sole proprietorships barred from ICHRA participation? The reasoning comes from the tax code: only employees can receive fringe benefits like health reimbursements tax-free.

This prevents these owners from getting a special tax reimbursement from a business they already own. Instead, they are expected to handle obtaining health insurance coverage in another way (such as through self-employment health insurance deductions, which will be covered next).

By contrast, a C-corp owner is not considered self-employed because the corporation is a separate entity and the owner is an employee of their own company. That’s why C-corporation owners can fully participate in ICHRAs or other benefits as long as they’re on payroll.

It’s worth noting that the same rules don’t apply to traditional group health insurance plans. When it comes to group health policies, any employee (including owner-employees) can enroll. However, tax treatment of their premiums is altered depending on the type of owner they are.

Because an ICHRA is a tax-free reimbursement vehicle, the IRS draws a line on owner eligibility upfront rather than simply altering the tax treatment.

Options for business owners ineligible for ICHRA

If you’re an owner who falls into an ineligible category, you cannot receive a tax-free allowance through an ICHRA for your own health insurance. However, this doesn’t mean you’re without any recourse. Here are some alternatives you can leverage:

Finally, remember that being ineligible for the ICHRA doesn’t stop you from offering it to your employees . Many owners set up an ICHRA to better care for their employees and cover their own insurance needs separately.

Owners who sign their business up for an ICHRA are able to provide a valuable benefit with predictable costs, while handling their own insurance needs through one of the methods listed above. So, even if you can’t personally participate, you’re still providing a robust benefit for your team.

Conclusion

ICHRAs open the door for businesses of all sizes to offer health benefits in a flexible way. While the rules governing ICHRA limit which business owners can participate in this type of health benefit, there are ways to work around these limits. You can use tax deductions or spousal coverage to take care of your own insurance, while still reaping the advantages of an ICHRA for your staff.

You also have the option to leverage solutions like Vitable Health’s care-backed ICHRA. With this benefit, you ensure that you’re truly supporting your team’s health and creating a way for you to access everyday care yourself.

If you’re an employer or broker looking to implement an ICHRA and have specific questions around owner eligibility nuances or how this benefit differs from traditional group health options, reach out to our team. We can help you set up a cost-effective, compliance-friendly plan and a healthier, happier workforce.

Sources

  1. https://tax.thomsonreuters.com/blog/can-a-companys-owners-participate-in-its-hra/
  2. https://www.healthcare.gov/small-businesses/learn-more/individual-coverage-hra/

Get a quote

Get a personalized health benefits quote tailored to your company’s unique needs.

Form

First name*

Last name*

Work email*

Phone number*

🇺🇸

Company name*

State*

Which of the following best describes you?*

Which of the following are you interested in?*

ICHRA Plans

QSEHRA Plans

Direct Primary Care

Major Medical

Occupational Health Platform

Other

Vitable Health needs the contact information you provide to us to contact you about our products and services. You may unsubscribe from these communications at anytime. For information on how to unsubscribe, as well as our privacy practices and commitment to protecting your privacy, check out our Privacy Policy.

Submit

Ready to learn more?

Stay ahead with the latest insights on healthcare, benefits, and compliance—straight to your inbox.

Form

First Name

Last Name

Email*

Which of the following best describes you?*

reCAPTCHA

Recaptcha requires verification.

protected by reCAPTCHA

Submit

reCAPTCHA

Select all images with crosswalks Click verify once there are none left.

Please try again.

Please select all matching images.

Please also check the new images.

Please select around the object, or reload if there are none.

Verify

Download 2025 Employer Guide to ICHRA

Vitable’s ICHRA Guide gives employers a clear, step-by-step resource for building smarter, ACA-compliant benefits.

This guide explains how ICHRAs work, who qualifies, and how Vitable simplifies setup, onboarding, reimbursements, and compliance — while giving employees more flexibility, control, and care.

Form

First Name*

Last Name*

Work Email*

Phone Number*

🇺🇸

Company name*

Job Title*

Which of the following best describes you?*

reCAPTCHA

Recaptcha requires verification.

protected by reCAPTCHA

Submit

reCAPTCHA

Select all images with bicycles Click verify once there are none left

Please try again.

Please select all matching images.

Please also check the new images.

Please select around the object, or reload if there are none.

Verify

Download Vitable’s 2025 Broker’s Guide to ICHRA

The Broker Guide to ICHRAs is a comprehensive resource that helps brokers understand, sell, and manage Individual Coverage HRAs with confidence.

This guide covers everything from compliance and class design to administration flows, case studies, and how Vitable streamlines quoting, enrollments, and reimbursements for brokers, employers, and employees.

Form

First Name*

Last Name*

Work Email*

Phone Number*

🇺🇸

Company name*

Job Title*

Which of the following best describes you?*

reCAPTCHA

Recaptcha requires verification.

protected by reCAPTCHA

Submit

reCAPTCHA

Select all images with bicycles Click verify once there are none left

Please try again.

Please select all matching images.

Please also check the new images.

Please select around the object, or reload if there are none.

Verify

High quality health plans that

just make sense.

Vitable helps employers provide better healthcare to their employees and dependents by improving accessibility, cost, and quality.

Get started

reCAPTCHA

Recaptcha requires verification.

protected by reCAPTCHA

reCAPTCHA

Recaptcha requires verification.

protected by reCAPTCHA

reCAPTCHA

Recaptcha requires verification.

protected by reCAPTCHA

reCAPTCHA

Select all images with bicycles Click verify once there are none left

Please try again.

Please select all matching images.

Please also check the new images.

Please select around the object, or reload if there are none.

Verify

reCAPTCHA

Select all images with cars Click verify once there are none left

Please try again.

Please select all matching images.

Please also check the new images.

Please select around the object, or reload if there are none.

Verify

reCAPTCHA

Select all images with cars Click verify once there are none left

Please try again.

Please select all matching images.

Please also check the new images.

Please select around the object, or reload if there are none.

Verify