COBRA Coverage while on ICHRA

Does my employer need to offer me COBRA coverage? And how does it work with ICHRA?

1. What COBRA Normally Does

• COBRA lets you continue your employer-sponsored group health plan if you lose coverage due to a qualifying event (like leaving your job, reduced hours, etc.).

• You pay the full premium (employer + employee share) plus up to a 2% admin fee.

2. What ICHRA Is

• An Individual Coverage HRA (ICHRA) is different — instead of a group health plan, your employer reimburses you for individual health insurance premiums (on-exchange or off-exchange) and sometimes other medical expenses.

• It’s not group coverage; it’s an employer-funded reimbursement arrangement.

3. How COBRA Applies to ICHRA

• Because ICHRA is considered a group health plan under federal law, it is subject to COBRA.

• That means if you lose eligibility (e.g., employment ends, hours reduced), your employer must offer you the option to continue your ICHRA benefit under COBRA.

• But here’s the difference:

  • What you’re continuing isn’t insurance coverage itself.

  • Instead, it’s the right to receive reimbursements through the ICHRA.

4. Practical Example

• While employed: Employer contributes $400/month to your ICHRA → you use it to pay your ACA marketplace premium.

• You leave your job: COBRA is offered. If you elect it, you can continue receiving that $400/month — but you must now pay the full “premium” (the employer’s $400 contribution + 2% admin fee) out of your own pocket.

• So in effect, you’d pay $408/month just to keep the right to receive $400/month back.

• This often doesn’t make financial sense, which is why most people don’t elect COBRA for an ICHRA. 

5. Key Points

• Yes, COBRA applies to ICHRA.

• But it usually isn’t worth electing, because you’re paying to keep a reimbursement benefit that you now have to fund yourself.