Why Embedded ICHRA Payments are Key to Next Generation Platforms

In the race to modernize healthcare benefits, stabilize costs for employers, and empower consumer choice, Individual Coverage Health Reimbursement Arrangements (ICHRAs) are gaining traction. However, not all ICHRA platforms are created equal.

As the market evolves, one factor is emerging as the true differentiator: ICHRA payments.

The Hidden Complexity Behind ICHRA Payments

At first glance, ICHRA’s promise seems simple. Employers shift from defined benefit model to defined contribution model. In turn, employees gain more choice and portability in their healthcare options. 

However, delivering on that promise introduces new complexities—ones that many platforms aren’t equipped to handle. Specifically, it requires a seamless, compliant, and scalable payment infrastructure.

Unfortunately, that’s where most platforms fall short.

Legacy systems were not designed to manage the nuances of ICHRA payments. These include affordability calculations, classification-based contributions, direct-to-carrier payments, multi-source funding, and real-time fund management. Without embedded payments, platforms often rely on manual reimbursements, which lead to high adjudication costs, poor user experiences, and limited scalability.

Comparing ICHRA Payment Models 

To meet the diverse needs of employers and employees, the ICHRA market supports three primary payment models. Each comes with its own implications for platform performance and user satisfaction.

1. Pay & Claim

In this model, employees pay premiums or bills out of pocket and then submit claims for reimbursement. The employer or administrator substantiates the claim, and reimbursement is issued to the employee via direct deposit or check.

• Advantages: It leverages existing platform and processes.
• Considerations: High cost to administer and low satisfaction among employees. 

2. Employee Card Pay 

Here, employees use a benefit card issued by the employer to pay premiums. The card draws from employer contributions and employee payroll deductions to ensure full payment.

• Advantages: It streamlines transactions and boosts satisfaction among employees.
• Considerations:  It requires robust card infrastructure to ensure payments are made to eligible merchants/carriers and able to handle multiple funding sources.

3. Corporate Pay

This model enables direct-to-carrier payments. During enrollment, employees elect autopay. Employer and employee funds are combined and sent to carriers via virtual card or ACH.

• Advantages: Corporate Pay reduces friction and maximizes efficiency.
• Considerations: Carriers may not universally accept a Corporate Pay model. The individual market lags other segments and often assumes payment from the individual.   Payments may not sync with real-time health plan enrollment status and changes — resulting in potential for over or under payments. 

By supporting all three models, administrators can deliver differentiated experiences, unlock virtual card revenue share, and minimize operating costs across varied employee and payee preferences.

Why Embedded Payments Drive Platform Growth

When CDH and ICHRA providers integrate Xformative’s cloud-native, API-driven platform, they gain:

• AML/KYC compliance and fraud protection

• Card issuance and fund management

• Real-time affordability logic and audit trails

• Modular architecture for rapid deployment

• SDKs and sandboxes for agile development

This isn’t just infrastructure—it’s a growth engine.

Choosing the Right ICHRA Payment Infrastructure 

As ICHRA adoption accelerates, platform differentiation will depend on execution. Embedded payments are no longer optional—they’re the backbone of a scalable, compliant, and user-friendly ICHRA offering.

At Xformative, we don’t just power payments. We power platforms.

Ready to differentiate your ICHRA offering with embedded payments? Learn how Xformative enables scalable, compliant solutions that drive growth.