ICHRA Software vs. Full-Service Vendors: What’s the Difference and Why It Matters

What are HRA and ICHRA?

A Health Reimbursement Arrangement (HRA) is an employer-funded benefit that reimburses employees for healthcare expenses. 

There are several types of HRAs, each designed for different company profiles:

• Group Coverage HRA (Integrated HRA): Paired with a traditional employer health plan to offset out-of-pocket costs.

• Qualified Small Employer HRA (QSEHRA): For employers with fewer than 50 FTEs offering a tax-free allowance for individual coverage.

• Individual Coverage HRA (ICHRA): Lets employers of any size reimburse employees for the cost of their own individual health insurance plans, rather than offering a one-size-fits-all group policy.

ICHRA is the fastest-growing option because it offers:

• Cost control for employers (you decide the budget and predict costs).

• Flexibility for employees (each person chooses a plan that fits their family, location, and health needs).

• Tax advantages (contributions are tax-deductible for employers and generally tax-free for employees).

This flexibility is why many businesses—especially startups and growing teams—are turning to ICHRA as an alternative to traditional group health insurance.

Why the delivery model matters

Once you’ve chosen ICHRA as your solution, the next big decision is how to administer it: through ICHRA software or a full-service vendor. Both approaches can be compliant, but the level of support, risk reduction, and employee experience varies significantly.

What is ICHRA software?

ICHRA software refers to technology platforms that employers use to manage the administration of their ICHRA benefits. These tools typically offer:

• Self-service employer onboarding

• Digital notice delivery to employees

• Reimbursement tracking and documentation

• Compliance support for IRS reporting

• Broker dashboards (in some cases)

Think of ICHRA software like a TurboTax for health benefits: you’re still doing most of the work, but the software guides you through it. This model is often appealing to smaller employers or benefit consultants who are comfortable navigating health insurance and compliance rules.

Key players: Take Command Health, PeopleKeep, Remodel Health (in software-only configurations)

What is a full-service ICHRA vendor?

A full-service ICHRA vendor goes well beyond software. These companies combine technology with live support, strategic guidance, and employee education to offer a more turnkey solution.

In addition to platform tools, full-service vendors typically provide:

• Custom ICHRA plan design consulting

• White-glove employee onboarding and support

• Real-time plan recommendation engines

• Ongoing compliance management and audits

• ACA reporting, W-2 preparation, and IRS form filing

• Integration with payroll, HRIS, and benefits systems

Some full-service vendors even act as co-pilots for brokers—helping with quoting, renewals, and client engagement throughout the year.

Key players: Thatch, Take Command Health (Enterprise), Gravie (via their own integrated model)

ICHRA Software vs. Full-Service Vendors: Head-to-Head

Why the difference matters

1. Your team's time and expertise

With ICHRA software, your team must understand the rules, handle documents, answer employee questions, and manage errors. Full-service vendors reduce that burden dramatically—especially valuable for lean HR teams or companies without dedicated benefits staff.

2. Employee experience

A great ICHRA experience depends on how easy it is for employees to shop for and enroll in individual coverage. Software-only solutions often link out to third-party marketplaces with limited plan comparisons.

By contrast, full-service vendors can guide each employee to the right plan for their budget, location, and needs, leading to better satisfaction and uptake.

Thatch data shows that employees offered curated plan recommendations are 2x more likely to successfully enroll compared to those using generic marketplaces.

3. Compliance risk

ICHRA rules are complex and evolving. For example, employers must:

• Reimburse only qualified expenses (IRS Publication 502)

• Avoid discriminatory plan designs (per ERISA and ACA)

Software can help—but full-service vendors offer hands-on support and an extra layer of human oversight, which reduces the risk of costly errors or audits.

Which one is right for you?

You might prefer ICHRA software if:

• You have 1–10 employees

• Your HR team is benefits-savvy

• You’re highly cost-sensitive

• You’re working with a broker who handles strategy

You might prefer a full-service vendor if:

• You’re scaling a team of 25+

• You want to minimize HR burden

• You need customized plan design

• You want a long-term, scalable solution

Many companies start with software and switch to full-service as complexity grows. Others go full-service from the start to avoid growing pains.

FAQs

Q: Are full-service ICHRA vendors more expensive? A: They typically cost more than software-only platforms, but the total ROI may be higher due to reduced HR time, better plan matching, and fewer errors.

Q: Can brokers still work with full-service ICHRA vendors? A: Absolutely. Some vendors, like Thatch, are built to support and scale broker relationships.

Q: Do I still need a compliance consultant with a full-service vendor? A: Not usually. Full-service platforms handle ACA, ERISA, COBRA, and IRS compliance as part of their offering.

Resources

• Healthcare.gov: What’s an ICHRA?

• IRS: Qualified Health Plans for ICHRA

• SHRM: Health Care Benefits Trends

• ERISA Compliance Guidelines

Last updated: August 2025

This article is for general educational purposes and is not legal advice. The opinions shared here belong to the author and are not official statements from Thatch. For legal and tax questions, please consult a qualified professional.