Plan Design Guide

How Employees Choose Coverage: Single Plan, Multi-Plan, Exchange or ICHRA

An employer can offer one plan, several plans from one carrier, a multi-carrier exchange, or an ICHRA that reimburses individual coverage. Each model trades employee choice against cost control and administrative work, and the right fit depends on group size, budget and how much risk you want to carry.

Related: CHOICE Arrangements, the new name for the ICHRA.

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Four Models

The Four Ways to Offer Coverage

Single Plan

One medical plan and one employer contribution. This is the simplest model to administer, explain and price. Employees who want a different design have no alternative, which can frustrate a workforce with mixed needs.

Multi-Plan, One Carrier

Several plan designs from one carrier, typically a richer plan, a standard plan and a high-deductible plan. Employees pick, and the employer sets a contribution toward each. The mix of plans employees choose affects how the carrier prices the group at renewal.

Multi-Carrier Exchange

A private exchange or marketplace platform lets employees choose among plans from several carriers, usually against a set employer contribution. It widens choice and moves shopping onto the platform. It also adds a vendor, platform fees and another enrollment system to manage.

ICHRA

The employer reimburses employees for individual-market premiums they choose themselves, up to a monthly allowance the employer sets. Employer cost is fixed by the allowance, not by claims or renewals. Employees shop the individual market, so networks and subsidy rules matter to them.

Read the ICHRA Guide

What Changes

How the Models Differ

Employer Cost Predictability

A single plan or multi-plan offer is still priced at renewal, so cost moves with claims experience and carrier trend. An exchange or ICHRA with a fixed contribution makes the employer cost predictable, and moves the risk of rising prices to employees.

Employee Choice

Choice rises from one plan, to a few plans, to many carriers, to the whole individual market. More choice helps employees whose needs differ and adds decisions for those who want a simple answer.

Administrative Work

A single plan is the lightest. A multi-carrier exchange or ICHRA adds eligibility rules, notices, reimbursement or platform steps, and employee education, so the extra choice carries a workload cost.

ICHRA Rules

Federal Rules That Shape an ICHRA

90-Day Notice

Employers generally must give eligible employees written notice at least 90 calendar days before the start of each plan year, so an ICHRA needs lead time before a January 1 start.

26 CFR §54.9802-4

Classes and Same Terms

The allowance can differ by class, such as full-time, part-time, salaried, seasonal or by rating area, but it must be offered on the same terms to everyone within a class.

Mixing With a Group Plan

An employer can offer a group plan to one class and an ICHRA to another. In that case minimum class sizes apply: 10 employees where the employer has fewer than 100, 10% where it has 100 to 200, and 20 above 200.

Participants must also be allowed to opt out of the ICHRA once per plan year. Confirm the details of your situation with your benefits attorney or tax advisor.

How to Choose

Three Questions That Decide the Model

How Much Cost Certainty Do You Need?

If the budget must not move, a fixed contribution through an exchange or ICHRA gives that certainty. If you are comfortable with renewal swings in exchange for a richer plan, a group plan keeps more of the cost with the carrier and your claims.

How Different Are Your Employees?

A workforce with wide differences in age, location and family status gains from choice. A small, similar team often does better with one plan that is easy to explain.

How Much Administration Can You Absorb?

Each step toward more choice adds notices, eligibility rules and employee support. Employers without a benefits administrator should price that work into the decision.

Compare ICHRA and Group Plan Cost

Common Questions

Employee Choice Questions

Can I offer an ICHRA to some employees and a group plan to others?

Yes, by class of employee. The allowance must be offered on the same terms within each class, and minimum class sizes apply when you offer both a group plan and an ICHRA.

Does offering several plans raise my cost?

It can go either way. Employees who choose leaner plans can lower your cost, but the mix of plans they choose also affects how the carrier prices your group at renewal.

What is the difference between a private exchange and an ICHRA?

A private exchange is still group coverage: employees choose among plans from several carriers through a platform. An ICHRA reimburses premiums for individual-market coverage the employee buys.

How early must ICHRA notices go out?

Generally at least 90 calendar days before the plan year begins, with later timing for employees who become eligible mid-year.

Sources

Where These Rules Come From

26 CFR §54.9802-4 (Individual Coverage HRA)

CFH are licensed insurance brokers, not tax advisors or attorneys. This page is general information, so confirm your situation with your CPA, tax advisor or benefits attorney.

Keep Reading

Related Guides

What Is an ICHRA?

How individual coverage HRAs work for employers, from setup to reimbursement.

Read the Guide

Fully Insured, Level-Funded and Self-Funded Plans

How the three funding models differ on cost, risk and data.

Read the Guide

Employer Contribution Calculator

Model what different contribution strategies cost your group.

Try the Calculator

Let’s Get to Work

Send us your renewal.

We’ll tell you whether it looks competitive, where we see opportunity, and the five questions we’d put to your carrier. No cost, and no obligation to move anything.

What to send

The renewal letter
Your current plan summary
Contribution split by tier
Enrolled counts by tier

Four documents, two more if your group is 50 or more. Nothing else; every extra one is a reason to postpone.

CFH Insurance Consultants

An independent employee benefits consulting firm. We look at the entire benefits program — cost, plan performance, risk and administration.

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