ICHRA Administration Cost: What Employers Actually Pay Per Employee in 2026

• Take Command lists ICHRA administration at $25+ per employee per month plus a $40+ monthly platform fee for employers with 1 to 49 employees, with custom pricing for 50+ (Take Command pricing page, 2026).
• PeopleKeep lists ICHRA administration starting at $25 per employee per month plus a $50 monthly base fee, with a three-seat minimum and no charge for opted-out employees (PeopleKeep pricing page, 2026).
• The administration fee is a small share of total ICHRA spend. At a $500 monthly allowance it is about 5%. The allowance the employer funds is the real cost driver.
• More than 20,000 U.S. businesses offer an ICHRA or QSEHRA in 2026, covering at least 500,000 employees, according to the HRA Council's 2026 report.
• CMS and the Small Business Administration now call the ICHRA a CHOICE Arrangement. The rules and the admin costs did not change with the name.

Most employers who search for ICHRA administration cost have already decided the model is interesting. The group renewal came in high, or the team is spread across states, and an individual coverage HRA looks like a way to set a fixed budget. The next question is simple: what does it cost to run? This guide separates the admin fee from the allowance, shows real published prices, and walks through the math for a small team.

What is ICHRA administration cost?

ICHRA administration cost is the fee a third-party platform charges an employer to operate an individual coverage health reimbursement arrangement. An ICHRA (individual coverage HRA) is an employer-funded account that reimburses employees tax-free for individual health insurance premiums and, if the plan allows, other medical expenses.

The ICHRA administration fee pays for the plan document, the required employee notices, proof-of-coverage checks, reimbursement processing and reporting support. The ICHRA administration fee does not include the monthly allowance the employer gives each employee. That allowance is the benefit itself, and it is almost always the larger number.

Employers can legally self-administer an ICHRA, but few do. The IRS, Department of Labor and HHS final rules from 2019 require written plan terms, a notice to each eligible employee at least 90 days before the plan year, and verification that each employee has qualifying individual coverage before any reimbursement is paid. A platform handles those steps on a schedule.

How much does ICHRA administration cost per employee?

Published ICHRA administration pricing in 2026 starts at about $25 per enrolled employee per month (PEPM), plus a flat monthly platform or base fee of $40 to $50. PEPM means the fee is charged once for each enrolled employee, each month.

Many ICHRA administrators no longer publish rates and quote by company size, state mix and service level. The two published price sheets above give employers a fair benchmark to compare quotes against. A quote far above $25 PEPM should come with a clear reason, such as full-service employee enrollment support or complex multi-state class design.

What does an ICHRA cost in total for a small business?

The total cost of an ICHRA equals the allowance the employer funds plus the administration fee. For most small employers, the administration fee is a small slice of the total, and the allowance drives the budget.

The table below uses the published starting rates: $25 PEPM plus a $40 to $50 monthly base fee. It assumes every eligible employee enrolls.

Now add the allowance. If the same 25-employee company gives each employee a $500 monthly allowance, the allowance costs $150,000 a year. The $8,000 administration cost is about 5% of the $158,000 total.

For context, the KFF 2025 Employer Health Benefits Survey put the average annual premium for employer-sponsored single coverage at $9,325 and family coverage at $26,993. An ICHRA lets the employer pick a fixed allowance instead of absorbing whatever the group renewal brings.

What other costs come with an ICHRA?

The platform fee is only one line. Employers should budget for five other items before they compare an ICHRA to a group plan renewal.

1. The allowance. The employer sets a monthly amount per employee class. This is the benefit and the largest cost.
2. Minimum seats and admin seats. PeopleKeep bills a minimum of three seats and charges a seat fee for account administrators, even if the administrator is not in the plan.
3. Broker or advisor time. Some employers use a broker to design classes and help employees pick individual plans. The broker may be paid through individual market commissions or a flat consulting fee.
4. Affordability testing for larger employers. Employers with 50 or more full-time employees (applicable large employers under the ACA) must set allowances high enough to be affordable. For 2026, an ICHRA is affordable if the employee's cost for the lowest-cost silver plan, minus the allowance, is no more than 9.96% of household income (IRS Revenue Procedure 2025-25).
5. Internal HR time. New-hire notices, waiver tracking and questions from employees still land on someone inside the company, even with a platform.

Can employees pay the rest of their premium pre-tax?

Yes, in many cases. When an employee's individual plan costs more than the ICHRA allowance, the employee pays the difference. Without a Section 125 plan, that difference comes out of after-tax pay.

A Section 125 cafeteria plan lets employees pay that premium gap with pre-tax salary reductions. The limit is that Internal Revenue Code Section 125(f)(3) does not allow a cafeteria plan to pay for coverage bought on an ACA exchange. So the pre-tax option works only for individual plans bought off the exchange.

Here is the math on one employee. Say the off-exchange plan costs $650 a month and the ICHRA allowance is $500. The employee pays $150 a month. Run through a Section 125 plan, that $150 is not subject to FICA (Federal Insurance Contributions Act payroll tax, 7.65% for each side). The employer saves about $11.48 a month in FICA on that one employee, and the employee also avoids federal income tax on the $150.

The Section 125 layer is a separate plan with its own written document, election forms and nondiscrimination testing. Most ICHRA platforms do not provide it. Our guide to running ICHRA and Section 125 together→ covers the setup in detail, and the Section 125 plan cost→ page covers what that layer costs.

How do you lower ICHRA administration cost?

Employers lower ICHRA administration cost mostly by controlling who is billed and by comparing like-for-like quotes.

• Require active waivers. Take Command charges for every employee who has not waived in the portal, so a clean waiver process cuts the bill.
• Ask for annual pricing. PeopleKeep lists a discount for annual subscriptions on its QSEHRA plan, and many vendors will quote annual terms for ICHRA too.
• Compare the base fee, not only the PEPM. For a 5-person company, a $50 base fee adds $10 per employee per month on top of the PEPM.
• Check what is included. Plan documents, 90-day notices, coverage verification and reimbursement review should be in the base price. Ask before signing whether enrollment help for employees costs extra.
• Consider a QSEHRA if you are small. Employers with fewer than 50 full-time employees and no group plan can use a qualified small employer HRA (QSEHRA) instead. It has annual caps but a simpler design. See the 2026 QSEHRA reimbursement limits→.

Is an ICHRA cheaper to run than a group health plan?

An ICHRA is usually cheaper to budget, but not always cheaper in total. The administration fee is small and predictable. The allowance is set by the employer, so there is no surprise renewal increase. With a group plan, the carrier folds admin costs into the premium and the renewal decides the number.

The HRA Council's 2026 report found that more than two-thirds of small businesses offering an ICHRA had not offered any health coverage before, and nearly a third moved from the small group market. That pattern shows where ICHRA fits best: employers who want to offer coverage for the first time, or who want a fixed budget after a sharp renewal.

An ICHRA fits less well when most employees live in counties with few individual market carriers or high individual premiums. Employers should price real individual plans in their employees' ZIP codes before comparing. For a plain-English look at how the benefit works, start with how an ICHRA works→.

Who should run the ICHRA and the Section 125 layer?

An ICHRA platform such as Take Command or PeopleKeep typically runs the allowance, notices, coverage checks and reimbursements. A Section 125 administrator runs the pre-tax premium piece: the cafeteria plan document, salary reduction elections, nondiscrimination testing and year-end W-2 reporting.

Benecor Health builds the Section 125 layer alongside an employer's ICHRA and coordinates it with the ICHRA platform at the payroll step. Before any setup, a Benecor benefits expert models the full cost on the employer's census: the admin fee, the allowance by class, and whether pre-tax premium payments lower the total enough to justify a Section 125 plan.

Sources: Take Command, HRA Administration Pricing page (checked September 2026); PeopleKeep, HRA Administration Software Pricing page (checked September 2026); HRA Council, 2026 HRA data report as released via PR Newswire (2026); Take Command, ICHRA Is Now the CHOICE Arrangement (September 4, 2026), citing CMS and the U.S. Small Business Administration; IRS Revenue Procedure 2025-25 (2026 affordability percentage of 9.96%); Health Reimbursement Arrangements and Other Account-Based Group Health Plans, final rules, 84 Federal Register 28888 (June 20, 2019), 90-day notice and substantiation requirements; Internal Revenue Code Sections 125(f)(3), 3101 and 3111; KFF, 2025 Employer Health Benefits Survey.