ICHRAs have been gaining traction since they became available for plan years beginning January 1, 2020. Now, a wave of state-level legislation is adding a new layer of financial incentive on top of the already significant federal tax advantages. The landscape is worth understanding…both for what’s happening in other states and for what it signals about where ICHRA policy is heading.
Two States Have Enacted ICHRA Tax Credits
Indiana led the way. Effective January 1, 2024, Indiana created the first state tax credit for small employers that replace traditional group health insurance with an ICHRA. It applies to employers with fewer than 50 full-time employees and provides up to $400 per covered employee in the first year and up to $200 per covered employee in the second.
Mississippi became the second state to act. The Governor signed HB 343 into law in early April 2026, effective retroactively to January 1, 2026. Small employers with fewer than 50 employees who offer an ICHRA in lieu of a traditional group health plan can claim a state income tax credit of up to $400 per covered employee in year one and $200 per covered employee in year two, with a statewide annual cap and a 10-year carry-forward provision for any excess credits.
Several States Are Active and Close
Ohio (HB 133) passed the House unanimously in June 2025 and is awaiting Senate action.
Connecticut (HB 5041) was reported out of the House Finance, Revenue and Bonding Committee on April 7, 2026.
New Hampshire (SB 635) was reported out of the Senate Ways & Means Committee in March 2026.
Pennsylvania (HB 2550) passed the House 200-2 on June 10, 2026.
Bills That Did Not Advance
Arizona (HB 2694)
Georgia (HB 1110)
Texas (SB 1949)
Wisconsin (SB 896/AB 915)
The states that have enacted credits – and the several more close to doing so – are sending a consistent signal: ICHRAs are being recognized as a legitimate, policy-supported alternative to traditional group health insurance. That’s a tailwind worth using.
The IRS Guidance Angle
Alongside state legislative activity, IRS Notice 2026-5 (Q&A #5) delivered meaningful federal-level clarity. Per the guidance, a bronze or catastrophic plan available as individual coverage will not fail to qualify as a High Deductible Health Plan (HDHP) solely because an employer-sponsored ICHRA is used to purchase it.
That matters because HDHP status is the gateway to HSA eligibility. The guidance puts the ICHRA + HDHP + HSA combination on clearer regulatory footing, opening a meaningful cross-benefit planning opportunity for brokers whose clients want to pair ICHRA reimbursements with HSA contributions.
Diversified administers both ICHRAs and HSAs, making us a natural fit for clients looking to implement this type of coordinated strategy.
A Note on Our WMC Partnership
Diversified’s partnership with Wisconsin Manufacturers & Commerce (WMC) gives Wisconsin brokers an additional talking point. WMC members receive a discount on our standard monthly ICHRA administration fee. With over 3,800 member companies across the state, this is a meaningful outreach opportunity heading into the next plan year. Learn more at wmcinsurance.org/ichra