Is your client a good fit for ICHRA?

Since ICHRA became available in 2020, it has grown into one of the fastest-growing benefits options among employers of all sizes, giving brokers a flexible, cost effective alternative to offer clients who have outgrown or never fit into a traditional group plan.

As a broker, you are often the one who has to answer a deceptively simple question: Is ICHRA a good fit for this particular client? The answer depends on the makeup of their workforce, their industry, their budget, and what they are trying to accomplish with their benefits strategy. This guide walks through how to evaluate client fit for ICHRA, which industries tend to see the strongest results, and how to have that conversation with confidence.

What is ICHRA, and why does fit matter so much?

ICHRA replaces the one size fits all group health plan with a defined contribution model. Instead of selecting a single plan for the whole company, the employer sets a monthly allowance, and employees use that allowance to shop for an individual health plan on the marketplace that fits their own needs. The employer reimburses the employee tax free, up to the allowance amount, for premiums and in many cases other eligible medical expenses.

This flexibility is exactly why fit matters. ICHRA is not a universal upgrade from group coverage. It is a different model built for different circumstances. A client with a stable, higher income workforce that already loves their group plan may not benefit from switching. A client with a mixed workforce spread across several states, a tight budget, or a history of unpredictable renewal increases often benefits significantly. Knowing how to tell the difference is what makes your recommendation credible.

Take Command's platform is built to support that evaluation and the entire administration process that follows, so your client is supported by industry experts at every step, from initial setup through ongoing compliance.

Should you recommend ICHRA to your clients?

Before recommending ICHRA, it helps to look at the client's workforce structure, their current benefits experience, and their goals for the coming plan year. A few questions can guide that conversation.

• Does the client have employees in different classes, such as full time, part time, seasonal, or remote workers?

• Are they struggling to control year over year premium increases?

• Have they had trouble finding a group plan that satisfies employees across different income levels, ages, or locations?

• Are they offering benefits for the first time and want to avoid the administrative burden of a traditional group plan?

If the answer to several of these is yes, ICHRA is worth a serious look. If the client has a workforce that is largely uniform in age, income, and location, and they already have a group plan that is well liked and reasonably priced, ICHRA may not offer much of an advantage yet. That said, circumstances can change quickly, and a client who is not a fit today may become one after a renewal increase, a merger, or a shift toward a remote or multistate workforce that a single group plan network can no longer serve well.

ICHRA classes: Matching the model to a mixed workforce

One of ICHRA's defining features is the ability to divide employees into classes and offer a different allowance to each one. This is particularly useful for employers who cannot reasonably offer the same group plan to every worker. The following employee types can each be treated as their own class under ICHRA.

• Full time employees

• Part time employees

• Seasonal employees

• Employees covered under a collective bargaining agreement

• Employees in a waiting period

• Employees working outside the United States

• Employees working in the same geographic location, such as a shared rating area, state, or multistate region

• Salaried employees

• Non-salaried or hourly employees

• Temporary employees placed through a staffing firm

• Any combination of two or more of the classes above

Each class can also be further divided by age and number of dependents, which allows an employer to fine tune contributions in a way that a traditional group plan simply cannot match. A restaurant group with full time managers, part time servers, and a rotating cast of seasonal staff can offer three distinct allowance levels instead of trying to force everyone into a single plan design.

What industries are a good fit for ICHRA

Certain industries consistently see strong outcomes with ICHRA, largely because of workforce characteristics that make traditional group coverage difficult to manage. Businesses with high turnover, short average tenure, a large share of lower wage or hourly workers, or a mix of salaried and hourly staff tend to be strong candidates. The following industries commonly fall into this category.

• Hospitality

• Retail

• Restaurants and food service

• Manufacturing

• Non-profits

• Delivery and logistics

• Construction

• Landscaping

• Healthcare

• Professional services

These industries share a common thread. Their workforces are often geographically spread out, seasonal, or made up of employees with widely varying income levels. A traditional group plan tends to serve one type of employee well and leave others underserved or priced out. ICHRA solves this by letting each employee choose a plan that fits their own life, while the employer keeps a predictable, budget friendly contribution structure.

It is worth noting that industry alone does not determine fit. A professional services firm with a small, well paid, and largely uniform staff may not see the same advantages as a similarly sized construction company with a mix of office staff and field crews. Industry patterns are a useful starting point for the conversation, not a final answer.

Client fit for ICHRA: Signs to look for

Beyond industry, there are specific business characteristics that tend to signal a strong fit for ICHRA. A client is generally a good candidate for ICHRA if they:

Explaining ICHRA benefits to your client

Once you have determined that a client is a good candidate, the next step is helping them understand why the switch is worth making. A few talking points tend to resonate.

ICHRA allows the employer to step out of the health insurance risk management business. Instead of absorbing renewal increases and negotiating plan designs every year, the employer sets a contribution and the marketplace absorbs the rest. There are no participation requirements to worry about, which removes a common barrier for employers with a lot of part time or remote staff. Contributions do not increase automatically the way group premiums often do, giving employers more control over their annual benefits budget.

For employees, the advantages are just as real. They can choose the plan that actually fits their needs, rather than settling for whatever the employer selected. Reimbursements for premiums and other qualifying expenses are tax free. And because the plan is individually owned, coverage is portable. If an employee leaves the company, they keep their plan rather than losing coverage the day their employment ends.

Want to learn more?

Determining client fit is easier with the right tools and support behind you. Take Command's ICHRA administration platform is built to simplify the entire ICHRA process, from initial fit assessment through plan administration, so you can bring clients a confident recommendation backed by a team of industry experts. Talk to a Take Command expert to learn more.

Frequently asked questions

How is ICHRA affordability calculated for 2026?

For plan years beginning in 2026, the IRS affordability threshold is 9.96 percent, an increase from 9.02 percent in 2025.This means coverage is considered affordable if the employee's required contribution for self-only coverage does not exceed 9.96 percent of their household income Employers subtract the ICHRA allowance from the lowest cost silver plan premium in the employee's area, and the remaining amount is compared against that threshold. Since employers do not typically know an employee's exact household income, the IRS offers three safe harbors, based on W-2 wages, rate of pay, or the federal poverty line, that employers can use instead.

Can a business of any size offer ICHRA?

Yes. Unlike traditional group plans, ICHRA has no minimum group size and no participation requirements, which makes it accessible to very small employers as well as large, multistate organizations.

Will switching to ICHRA disrupt employees who like their current coverage?

Not necessarily. Employees select their own plan on the individual marketplace, which often includes many of the same carriers and provider networks available through group coverage in that area. The transition typically requires more employee education upfront, but it does not force anyone into a specific plan.

Does ICHRA cost more than a group plan?

Not inherently. Because the employer sets a fixed contribution rather than absorbing the full cost of whatever the group plan renews at, ICHRA often gives employers more predictable and, in many cases, lower costs over time. The right contribution strategy depends on the client's workforce and budget goals.

Originally published in 2023, updated for 2026.