You’ve probably seen it — the blog posts, the broker presentations, the benefits-tech startups promising a simpler future. Give employees a monthly allowance, let them shop for their own coverage, and get out of the benefits business.
The vehicle is most often an ICHRA (Individual Coverage Health Reimbursement Arrangement) or a QSEHRA (Qualified Small Employer Health Reimbursement Arrangement). Both are real, federally sanctioned tools. Both have a specific problem in Washington’s market that rarely makes it into the sales presentation.
What These Tools Actually Are
ICHRA — Available to employers of any size. The employer sets a fixed monthly reimbursement amount, and employees use that allowance to purchase their own individual coverage through Washington’s exchange or directly from a carrier. Employees pay premiums out of pocket and submit documentation for tax-free reimbursement. No group contract, no renewal negotiation.
QSEHRA — Same concept, restricted to employers with fewer than 50 employees who don’t offer a group plan. The 2025 IRS contribution limits are $6,350/year for individual coverage ($529/month) and $12,800/year for family coverage ($1,067/month). Reimbursements are tax-free to employees and deductible for the employer.
The appeal is real: fixed contributions, no renewal volatility, simplified HR (in theory), employee choice. On paper, it reads like the future of benefits. The problem isn’t the tools. It’s what employees find on the other side of them in Washington.
The Washington Individual Market Problem
Both tools point employees toward Washington’s individual insurance market. That market has structural limitations that ICHRA and QSEHRA advocates don’t spend much time on.
Limited Plans - Carrier participation varies sharply by geography. In many Washington counties — eastern Washington, the Olympic Peninsula, and rural areas across the state — employees may have access to two or three plans from a single carrier. The employee choice that makes these tools appealing is often largely absent in practice.
Doctors Not Covered - Individual market networks are narrow by design. Plans achieve their premium levels partly by contracting with fewer providers. Employees moving from a group PPO to exchange coverage routinely discover their physicians, specialists, and hospital systems aren’t in-network.
High Premiums/High Deductibles - Individual premiums also absorb a higher-risk population which results in significant premium increases annually. Many carriers have added larger deductible bronze plans as their primary strategy to keep customers when they can no longer afford the better coverage plans. Individual plans lack the leverage of group enrollment — the allowance that looks adequate on a spreadsheet often falls short when employees are actually shopping.
The APTC Problem: What the Sales Presentation Usually Skips
The Advance Premium Tax Credit (APTC) is the federal subsidy that reduces what qualifying families pay monthly for individual coverage on Washington’s exchange under the Affordable Care Act. For many Washington families, it’s the primary mechanism that makes individual coverage “affordable”.
Both ICHRAs and QSEHRAs interact with APTC in ways that can cost employees significantly more than they expect.
ICHRA: If the employer’s offer meets the IRS definition of “affordable,” the employee loses APTC eligibility entirely — for themselves and their family — even if they never use the ICHRA. The test: the lowest-cost self-only silver plan premium minus the monthly ICHRA amount must exceed 9.02% of household income. Clear that bar, and APTC is gone.
QSEHRA: If the allowance is affordable, the employee receives no tax credits at all. If it’s not affordable, the employee’s APTC is reduced dollar-for-dollar by the monthly allowance amount. This means the employer is not helping to reduce costs for the employee, they’re just replacing government dollars with employer dollars, and the employee still pays the same monthly premium.
The $200/month reality: Even a modest employer contribution has real consequences. A $200/month QSEHRA contribution reduces a qualifying employee’s APTC by $200/month — $2,400/year — whether they wanted the QSEHRA or not. If that $200 happens to render the second-lowest-cost silver plan “affordable” under the IRS formula, the employee loses the full credit, not just $200 of it. For a family earning $45,000–$65,000 — a common wage range at small Washington employers — that APTC can represent thousands of dollars annually. A well-intentioned $200/month contribution can eliminate a credit worth four or five times that amount.
What Washington Employers Are Actually Looking For
Employers drawn to these tools are usually searching for something legitimate: cost predictability, less renewal volatility, reduced HR complexity. Those are achievable inside the group market — through exclusive access to better plan pricing, level-funded and self-funded structures, HRA overlays that improve first-dollar benefits without richer plan premiums, and strong employee advocacy that cuts HR’s administrative burden without the individual-policy chaos these arrangements tend to create.
For employers with lower-wage workforces who genuinely want to help employees access affordable family coverage, there are targeted strategies — including how dependent coverage decisions interact with APTC eligibility — that work with the subsidy system rather than against it.
The path to what the ICHRA pitch promises doesn’t run through Washington’s individual market. It runs through a more strategic approach to the group market — one most Washington employers have simply never been shown.
That’s what we do.