Do you have questions about the ICHRA class rules? The Individual Coverage Health Reimbursement Arrangement offers 11 classes, which separate employees into groups by legitimate job-based criteria like hours worked or location. Classes can be awarded different levels of benefits. This is a hallmark characteristic that gives business owners a lot of flexibility with the design. Let’s look at the ICHRA class rules, which ensure that benefits are offered fairly to all employees.
What are ICHRA classes?
Here's the gist.
- ICHRA classes help employers prioritize their health benefits budget, employee classes separate employees into groups by legitimate job-based criteria like hours worked or location.
- The nice thing about ICHRA is that you can combine it with a traditional group health plan.
- Employers may offer one class of employees a group health plan and another class of employees an ICHRA.
- The only caveat is that employers cannot offer employees in the same class (say full-time employees) the choice between a traditional group health plan or ICHRA.
- Each class needs to have only one benefit offering.
How do ICHRA classes work?
To help employers prioritize their health benefits budget, employee classes separate employees into groups by legitimate job-based criteria like hours worked or location.
The nice thing about an ICHRA plan is that you can combine it with a traditional group health plan. Employers may offer one class of employees a group health plan and another class of employees an ICHRA.
There's just one caveat. Employers cannot offer employees in the same class (say full-time employees) the choice between a traditional group health plan or ICHRA.
Each class needs to have only one benefit offering.
→ Read more for how to switch classes within an ICHRA.
What are the ICHRA classes?
The ICHRA classes are as follows.
|To satisfy the employer mandate, full-time employees must work at least 30 hours a week, but the exact definition can be determined by your business.
|Depending on the employer's needs, this can be defined as less than 30 or 40 hours a week.
|Employees who are hired on a short-term basis or for a particular season.
|Collective bargaining agreement
|This includes employees who are part of a CBA, which is a written agreement between an employer, employee, and their trade union on employment, pay rate, work hours, and other working conditions.
|New employees can have a waiting period before their health benefits start.
|Foreign employees working abroad, including non-resident aliens with no US-based income.
|Same geographic location
|This applies to employees in the same insurance rating area, state, or multi-state region.
|Employees who receive a salary as wages.
|Employees who do not receive a salary as wages.
|Employees brought on for specific and temporary needs.
|Combo of any of the above
|Create your own!
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.
Employees covered under a collective bargaining agreement
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).
Employees in a waiting period
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.
Foreign employees who work abroad
Employees who are non-resident aliens with no US-based income, including foreign employees who work abroad.
Employees working in the same geographic location
This would be for scaling reimbursements across employees that are in the same insurance rating area, state, or multi-state region.
Employees who receive a salary as wages.
Employees such as hourly workers who do not receive a salary as wages.
Temporary employees of staffing firms
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!
A combination of two or more of the above
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 be divided further by age and number of dependents.
ICHRA class rules: 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.
→ Learn more about our ICHRA administration software
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.
How ICHRA classes can impact reimbursement rates
ICHRAs allow employers to tailor reimbursement rates based on different employee categories, such as age or location. This customization ensures that employees in various demographics receive appropriate financial support for their healthcare needs.
This has an impact on reimbursement rates because it allows the employer to streamline their benefits spend.
How to change classes in an ICHRA
There are situations when an employee moves out of a class offering an individual coverage health reimbursement arrangement into a different class that is offered either a traditional group health plan, a different ICHRA reimbursement level, or no coverage at all.
So, what happens if an employee goes from full-time to part- time or moves to a new location but still works for the company?
When an employee moves between classes in an ICHRA plan, it can be a relatively easy fix as long as the re-classification is not due to termination of employment or reduced working hours.
In such cases, the employee may be eligible for group continuation of coverage or COBRA. However, even if an employee stops enrolling in an ICHRA, they can still request medical care reimbursement for the coverage period they were enrolled in. It's important to note that if an employee loses their ICHRA coverage, they may qualify for a special enrollment period (SEP) for loss of minimum essential coverage (MEC) to obtain individual health insurance coverage either on or off of the Exchange.
The ICHRA plan is a versatile benefit that can be designed to fit the unique needs of employees, and our team of design consultants is always available to help. With the potential to benefit up to 11 million American workers, it's an exciting time for healthcare benefits.
For more information on ICHRA, check out our FAQ page or read our ICHRA Guide.
If an employee moves from a class receiving an ICHRA to another class receiving a different reimbursement level, the final rule indicates that any unused funds can be transferred to the new class/ new individual coverage HRA group.
What is a rating area for ICHRA classes?
A rating area in insurance refers to a geographic area used by insurance companies to determine the premiums for health insurance plans. These areas are defined by the state or federal government and are typically based on factors like healthcare costs, provider availability, and the health status of the population. Premiums for insurance plans may vary within and across rating areas, with higher-cost areas often resulting in higher premiums to account for the increased risk and healthcare expenses associated with those regions.
Updates to ICHRA Classes for 2023
There haven't been any major updates to ICHRA classes for 2023. We are keeping an eye on this and will keep you informed!
Still have questions about ICHRA class rules?
Take Command is here to help you with your ICHRA administration questions or to find the right fit for you, your business, and your employees.
Additional resources →
- Learn about ICHRA Rules
- Learn about ICHRA Requirements
- Learn about ICHRA Regulations
- Learn about ICHRA Plan FAQs
- Learn about our ICHRA administration platform
This post was originally published in 2021 and has been updated in 2024 to reflect the most recent changes.
A wife to one and mother to four, Keely does all of the things. She’s also dabbled in personal finance blogging and social media management, contributed to MetroFamily magazine, and is passionate about good food, treasure hunting and upcycling. With a B.S. in Psychology from the University of Oklahoma and a knack for a witty punchline, it’s no surprise that Keely’s social posts are as clever as they get. In her (very little) free time, you’ll find Keely with her nose in a book or trying out a local restaurant with her family.