An ICHRA moves the decision. It does not remove it.
An Individual Coverage HRA lets an employer fund individual market coverage instead of sponsoring a group plan. For some employers it is a genuinely better answer. For others it transfers the hardest part of the problem — choosing a plan and a network — onto employees who have never had to do it, and the employer still owns the compliance. The difference is almost entirely in the modeling and the administration. If you are still deciding between an ICHRA and a group plan, start with our ICHRA vs. group health guide.
The answer is in your census, not in a case study.
An ICHRA is priced off the individual market where each employee lives and ages. That makes geography and age distribution the whole question, and it is why the same design can be excellent for one employer and punitive for another down the road.
Where Your People Live
Individual market rates and networks vary sharply by county. A workforce spread across several markets can be well served; a workforce concentrated where the individual market is thin usually is not. The figure to model is the lowest-cost silver plan in each employee’s rating area, because that is what affordability is measured against. Check that local plans include the doctors and hospitals your employees use, since an individual plan with a narrow network is a different product from the group plan they know.
Age and Family Mix
Individual premiums rise with age, so an older workforce shifts cost onto exactly the employees least able to absorb it unless the allowance is designed to account for it. Families are where this becomes visible fastest. The rules let the allowance vary by age and family size, within limits. Model it against your actual census before choosing, because a flat allowance can look generous on average and still leave older employees and families worse off than under the group plan.
What It Does to the Mandate
For an employer subject to the employer mandate, an ICHRA can satisfy it — but only if the allowance clears the affordability test. That test is an arithmetic exercise against the lowest-cost local plan, and it has to be run before the design is announced.
Classes, notices and dates. In that order.
The rules are specific and unforgiving, and most of the failures we see are procedural rather than strategic.
Employee Classes
The permitted classes are defined in regulation — full-time, part-time, seasonal, geography and a short list of others. You cannot invent a class, and you cannot offer a group plan and an ICHRA to the same class. Minimum class sizes also apply to some classes when a group plan is offered to other employees, so a split by geography or job type has to be large enough to qualify.
The Notice Deadline
Ninety days before the start of the plan year. It is not a formality: employees need that window to shop the individual market and to understand that enrolling in the ICHRA affects their eligibility for a premium subsidy. New hires who become eligible later get the notice no later than the date their coverage could start. Because the notice states the classes and allowances, both have to be settled well before that date, not in the weeks leading into it.
Substantiation
Employees must verify they have individual coverage, at enrollment and with each reimbursement. Administered properly this is routine. Administered casually it is the finding in an audit. The administrator should collect verification of coverage at enrollment and again with each reimbursement request, and keep the records. We check that the administrator you choose does this as a matter of course, not only when asked.
Employees moving to individual coverage need guidance, not an email.
Plan Selection Support
Real help comparing individual plans on network, drug coverage and total cost — the work your employees have never had to do and will do badly alone. Employees can call us during enrollment to work through their choices, so the questions reach someone who knows the individual market rather than landing on HR. The most useful thing for an employee to bring is a list of current doctors and prescriptions.
Subsidy Interaction Explained
An affordable ICHRA offer makes an employee ineligible for marketplace subsidies. Told clearly up front, that is a trade-off. Discovered later, it is a grievance. An employee offered an unaffordable ICHRA can opt out and may claim a subsidy instead, but cannot use both. Explaining this before the plan year, with the employee’s own numbers where possible, is what keeps it a trade-off.
A Year-One Support Plan
Someone to call when a claim, an invoice or a reimbursement goes wrong in the first year, which is the year it will. The problems are predictable: a missed premium payment, a reimbursement held up for missing proof, or a policy that lapsed because a bill went to the wrong address. Having someone ready to fix those early keeps an administrative problem from being blamed on the design.
What employers ask about an ICHRA.
Does an ICHRA remove our obligations?
It moves the decision to the employee; it does not remove yours. An applicable large employer still has an offer to make, and whether the ICHRA satisfies it depends on affordability calculated against where your employees actually live. The employer also still owes the notices, the Forms 1095-C that report the offer, and oversight of the administrator handling reimbursements.
Who is a good candidate for one?
Usually a distributed workforce, or one where the local individual market is strong. Where your people live, and their age and family mix, decide whether the arithmetic works — a modeling question before it is a strategy question. It is usually a weaker fit where most employees are older, live in one county with few individual carriers, or rely on a hospital system the local individual plans leave out.
Can we offer it to only some employees?
Yes, through defined classes, and the class rules are specific. Building classes that match how you actually employ people is the part that takes the time. Within a class, every employee must be offered the ICHRA on the same terms, though the allowance can still vary by age and family size. One approach is keeping the group plan for full-time staff and offering an ICHRA to another class, such as part-time or out-of-state employees. Some classes must meet a minimum size when a group plan is offered alongside the ICHRA, so check the headcount in each class first.
ICHRA and QSEHRA in Bloomfield Hills for Employers Who Want a Set Budget
Many employers want to help with health costs, but a traditional group plan feels too expensive or too hard to predict. Others have staff spread across many ZIP codes. For them, ICHRA and QSEHRA in Bloomfield Hills can offer a set budget and more choice for employees.
We are CFH Insurance Consultants, an independent employee benefits consulting firm on Woodward Avenue since 2007. We help you decide if one of these plans fits. Then we set it up with an administrator and help your employees understand it.
ICHRA & QSEHRA
Both are types of HRA, or health reimbursement arrangement. With an HRA, the employer sets a monthly allowance. Employees buy their own individual health insurance. The employer then pays them back, tax-free, up to that allowance.
A QSEHRA, or Qualified Small Employer HRA, is for employers with fewer than 50 full-time employees. An ICHRA, or Individual Coverage HRA, can be used by an employer of any size. ICHRA also lets you set different allowances for different classes of employees, such as full-time and part-time.
CFH does not administer these plans. We pick an administrator with you, set up the plan and hold the administrator to its contract. We also help your employees with questions about picking an individual plan and getting reimbursed.
What is the difference between ICHRA and QSEHRA?
The biggest differences are size and flexibility. QSEHRA is only for small employers with fewer than 50 full-time employees, and it has yearly limits set by the IRS. ICHRA works for any size and has no such cap. ICHRA also allows different amounts for different employee classes.
For employers with 50 or more full-time-equivalent employees, the ACA employer mandate still applies. An ICHRA must meet ACA rules to count as an offer of coverage. Those employers also send Forms 1095-C early each year. We help keep you ERISA compliant and walk through these rules with you.
Can a Michigan small business offer an ICHRA instead of group health insurance?
Yes. A small employer can choose an ICHRA or a QSEHRA instead of a group plan. In Michigan, small-group rates are set by carrier filings, ages and ZIP codes, so a group plan can be costly for some small firms. An HRA gives you a fixed budget instead.
It is not right for everyone. Some employees prefer a group plan with a familiar network. Individual plan choices vary by county. We compare both paths with you, from Birmingham to Pontiac to Novi, before you decide.
Common questions
Who runs the reimbursements?
An outside administrator does. We find and oversee that administrator, and we step in when an employee’s reimbursement goes wrong. Employees should know who to contact before the first reimbursement request, so the administrator’s contact details belong in the enrollment materials rather than a follow-up email.
When should we start?
Give yourself time before open enrollment in the fall. Employees need notice before the plan year starts. The notice has to reach employees ninety days before the plan year, and the classes and allowances have to be settled before the notice can be written, so for a January start the modeling belongs in the spring or early summer.
Do you work with ICHRA and QSEHRA outside Bloomfield Hills?
Yes. Our office is in Bloomfield Hills, and we serve employers across the whole state of Michigan. Employees who live in other states can be included too, since the allowance is modeled against the individual market where each employee actually lives.
Talk to us about ICHRA and QSEHRA in Bloomfield Hills
Book a 30-minute call or send us your current renewal, and we will compare an HRA with your group plan. Our office is at 41000 Woodward Avenue, Suite 350 East, Bloomfield Hills, MI 48304. Call 248.370.8853.
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.
An independent employee benefits consulting firm. We look at the entire benefits program — cost, plan performance, risk and administration.
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