One of the greatest points of the newest HRA, the individual coverage HRA (or ICHRA, or “ick-rah”), is the freedom and flexibility of the employee classes. To help employers prioritize their health benefits budget, ICHRA classes separate employees into groups by legitimate job-based criteria like hours worked or location. Different employee classes can be awarded different levels of benefits.
This is a hallmark characteristic of this new HRA that gives business owners a lot of flexibility with the design. On top of that, the allowances can be increased within each class based off of age and number of dependents.
The result is a more efficient approach to benefits, concentrating an employer's healthcare budget around the employees who matter most.
But we’re getting ahead of ourselves. What are these classes and how do they work? Let’s jump in!
The official list of the employee classes for ICHRA
The final HRA rules that came out last summer outline the following as ICHRA classes.
- Probably self-explanatory, but your business can define whether this means 30 hours or 40 hours a week, but keep in mind that to satisfy the employer mandate, it will need to be at least 30 hours a week.
- Depending on the employer's needs, this can be defined as either less than 30 or less than 40 hours a week.
- Employees who are hired on a short-term basis or for a particular season.
- This includes employees who are part of a Collective Bargaining Agreement which signifies a written agreement between an employer, employee, and their trade union on the basis of employment, pay rate, work hours, and other working conditions.
- For employers with multiple collective bargaining agreements, each one qualifies as a separate class under ICHRA.
- An employer can combine a CBA classification with other permitted classes of employees (for example, combining the CBA class with the full-time employee and part-time employee classes to create full-time and part-time CBA subclasses).
Waiting Period Class
- Employees that just joined an employer. This is standard practice when new employees come on board. Businesses can choose up to 90 days before an employee’s health benefits kick in.
Rating Area Class
- This class can be broken up by employees located in different geographic locations. It is generally thought of as employees whose primary site of employment is in the same rating area.
Non-Resident Alien Class
- Employees who are non-resident aliens with no US-based income, including foreign employees who work abroad.
- Employees who receive a salary as wages.
- Employees, such as hourly workers, who do not receive a salary as wages.
- Employees placed for temporary assignments. ICHRA is a game-changer for this category, because now employers can choose the budget that works best for them and reimburse temporary employees that amount each month. It keeps the employer free from skyrocketing group plan costs and allows the employee faster access to the healthcare coverage they need!
- Employers can combine two or more of the above classes to create a new class based on their needs. That means the possibilities are endless!
Each class can further be divided by age and family size.
Minimum Class Size Requirements
Employers who plan to offer a traditional group health plan to at least one class of employees and an ICHRA to another class of employees will need to keep in mind the minimum class size requirements. These requirements were put in place to prevent the individual market from being saturated with high risk individuals.
Minimum class size requirements apply to the following classes:
- Salaried Employees
- Non-Salaried Employees
- Full-time Employees
- Part-time Employees
- Employees in the same geographic rating area
The minimum number of employees to be included in a class ultimately depends on the size of the employer based off the employee count on the first day of the plan year.
A few other ICHRA class size notes:
- Combo Classes: Minimum class size applies to any combo-classes that include one of the classes listed above unless it’s a combo with the waiting-period class, in which case there is no restriction
- Rating Area Classes: Minimum class sizes only apply to rating areas smaller than a state. For example, if you or your client has one employee in a remote state, you could have a class of one without violating the rules. However, if you’re using a narrower rating area design (typically at the “county” level) then minimum class sizes apply.
Important Reminder: Minimum class sizes only apply when at least one class is being offered a traditional group plan. If an employer is offering multiple ICHRAs to different classes, there are no minimum class size restrictions.
Next Steps and More Info:
We’ve covered a lot, but you may still have questions. For instance, what if an employee needs to change classes? Check that out here. Are retirees eligible for an ICHRA? We’ve answered that, too! Take Command Health is here to help you with your ICHRA questions or to find the right fit for you, your business, and your employees.