Making sense of the ICHRA class rules

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.

How 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 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.

What are the ICHRA classes?

The ICHRA classes are as follows:

• Full-time employees
• Part-time employees
• Seasonal employees
• Employees covered under a collective bargaining agreement
• Employees in a waiting period
• Foreign employees who work abroad
• Employees working in the same geographic location (same insurance rating area, state, or multi-state region)
• Salaried workers
• Non-Salaried workers (such as hourly workers)
• Temporary employees of staffing firms
• A combination of two or more of the above

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.

Minimum class size requirements apply to the following classes:

1. Salaried Employees
2. Non-Salaried Employees
3. Full-time Employees
4. Part-time Employees
5. 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.

Did we clear up some of the confusion around ICHRA class rules, or do you still have questions?

Wondering what to do if an employee needs to change classes? Check that out here. Curious as to whether retirees are eligible for an ICHRA? We’ve answered that, too!

Take Command is here to help you with your ICHRA questions or to find the right fit for you, your business, and your employees.