An ICHRA trades a predictable employer cost and wider employee choice for more employee decisions, more notices and tighter class rules.
Whether an ICHRA helps depends on how your workforce is spread across locations, ages and plan preferences. Here is what employers gain, what they take on, and how to test the fit before you commit.
What employers gain from an ICHRA.
Employer-Set Cost
You choose the allowance for each class, so your cost is a number you set rather than a figure that moves at each carrier renewal.
Local Allowances
The rules allow classes by rating area, so employees in higher-cost areas can receive an allowance that reflects local premiums.
Age-Scaled Allowances
Allowances may rise with age, as long as people of the same age get the same amount and the oldest receive no more than three times the youngest.
Employee Choice
Employees pick the individual plan that suits their doctors, family and budget instead of one employer-selected plan.
Any Employer Size
There is no employer-size limit, so the same arrangement works for a small firm or a multi-location employer.
Fits Mixed Workforces
Offer an ICHRA to one class and keep a group plan for another, within the minimum class size rules.
What an ICHRA asks of the employer, by situation.
| Employer Situation | Effect | What To Check |
|---|---|---|
| Employees in several rating areas | Allowance can track local premiums by class | Which rating area governs each employee |
| Wide age range among employees | Allowance can scale with age up to three to one | Same amount for the same age within a class |
| Employees who prefer the group plan | They move to individual coverage and choose a plan themselves | Enrollment help and a clear notice at least 90 days ahead |
| Group plan kept for one class | Two arrangements to administer | Minimum class size of 10 employees under 100 total, 10% from 100 to 200, 20 above 200 |
| Applicable large employer | The ACA affordability test still applies to the offer | Test affordability class by class |
| Mid-year hires or status changes | Notice timing and class moves need written rules | When a new hire or class change takes effect |
Examples are illustrative, not a recommendation for any specific employer. Counsel should confirm class design and timing.
The questions employers ask about ICHRA pros and cons.
Is an ICHRA cheaper than a group plan?
Not by default. The result depends on the allowance you choose, your workforce and what your group plan would cost at renewal. We model both side by side before you decide.
What is the biggest downside of an ICHRA?
Employees carry more of the decision, and the employer carries more notices and written rules. Enrollment help and clear class definitions reduce that burden.
Can employees keep their doctors?
That depends on the individual plan an employee selects and its network. Employees should confirm a doctor is in network before enrolling.
Can I offer an ICHRA to some employees and a group plan to others?
Yes, by class. When both are offered, minimum class sizes apply: 10 employees for employers under 100, 10% for employers with 100 to 200, and 20 above 200.
What notice do employees receive?
Written notice at least 90 days before the plan year begins, or by the date a later-eligible employee first becomes eligible.
Does the ACA affordability test still apply?
For applicable large employers, yes. The offer is tested for affordability, and the test can be applied class by class.
Where these details come from.
This page summarizes the rules from the primary sources below.
26 CFR 54.9802-4, ICHRA rules, classes, notice and allowances
More ICHRA questions and the industries they affect.
ICHRA vs QSEHRA vs HRA
How the three arrangements differ.
Affordability by Class
Test the ACA rule class by class.
Employee Enrollment Help
Support employees through the switch.
Allowance Cost Modeling
Model the allowance against your renewal.
ICHRA for Technology Companies
Distributed teams and fast hiring.
ICHRA for Retail Employers
Part-time and seasonal workforces.
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.
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.
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