One of the key features of HRAs is flexibility. They're are a great health care choice because they can be designed to meet the needs of both employers and employees.
ICHRA is one type of HRA, and strategically defining ICHRA employee classes maximizes that flexibility. Employee classes are levers you can pull to make your budget as efficient as possible while taking great care of employees.
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What are ICHRA classes
We have a great overview of ICHRA employee classes if you’d like to get a full understanding before jumping into the recommendations. Like we mentioned, ICHRA is one type of HRA, so if you’d like to get details on different HRA types, we’ve got you covered there as well. Only certain HRAs use employee classes, and ICHRA is the largest of those HRAs where employee classes apply.
The TLDR: There are 11 ICHRA classes, and each class represents an employee group defined by specific criteria. ICHRA classes empower businesses to customize benefits by setting different monthly allowances for different employee groups.
Defining ICHRA classes
HRA classes are defined by law and represent unique employee groups. Here are the 11 ICHRA classes:
| Class | Description |
| Full-Time Employees | Defined as employees working 30 or 40 hours per week (30+ hours required for ACA employer mandate compliance). |
| Part-Time Employees | Defined as employees working less than 30 or 40 hours per week, based on employer specifications. |
| Seasonal Employees | Defined as employees hired for short-term periods or specific seasons. |
| Collective Bargaining Agreement Employees | Defined as new employees during their benefit waiting period (up to 90 days). |
| Employees in Waiting Periods | New employees can have a waiting period before their health benefits start. |
| International Employees | Defined as non-resident aliens with no U.S.-based income, including international workers. |
| Employees in Same Geographic Location | Defined as employees grouped by insurance rating area, state, or multi-state region. |
| Salaried Employees | Defined as employees who receive fixed salaries as compensation. |
| Hourly Employees | Defined as employees compensated hourly or through other non-salary methods. |
| Temporary Employees | Defined as employees placed for temporary assignments, often through staffing firms. |
| Combination Classes | Defined as any combination of the above categories to create custom classifications. |
Key points about HRA classifications
There are some things to keep in mind about HRA classifications. An HRA administrator can guide you through the world of HRAs generally and with employee classes.
A few key points:
- Businesses can set different allowance amounts for different HRA classes
- Example: Full-time employees receive $500/month and part-time employees receive $300/month
- Each employee class must be offered the same benefit
- Classes can be combined with traditional group health plans
- Example: Full-time employees receive group coverage while part-time workers get ICHRA benefits
- Classifications must be based on legitimate job criteria
Why HRA classifications matter to businesses
The HRA classification system provides unprecedented flexibility in benefit design. (That’s one reason we love it!) This targeted approach helps employers optimize their benefits spending while ensuring appropriate support for each employee group.
6 ways to define ICHRA classes to benefit employers and employees
There is a strategic way to approach most business decisions, and ICHRA classes are no exception. The way you go about designing employee classes can have a far-reaching impact for your business and your employees.
Without further ado, here are the top 6 ways to strategically define ICHRA classes:
Offer group or ICHRA plans by geography
What you do: Offer a group plan in one geography and ICHRA in another
Helpful if: You have employees in one state who are a good fit for a group plan and employees in another state who don’t have access to that group plan or would benefit more from an ICHRA. An example would be a group health plan through Kaiser Permanente. Out-of-state employees wouldn’t stand to benefit from a Kaiser plan.
Benefit: Budget friendly for employers, accessible health care for employees
Include part-time or seasonal employees in your coverage
What you do: Instead of cutting benefits for part-time or seasonal employees, offer them an ICHRA
Helpful if: You want to extend a benefit to part-time or seasonal employees rather than leave them without health coverage
Benefit: Recruitment and retention, takes care of your part-time and seasonal workers
Scale based on family size and age
What you do: Adjust reimbursement rates based on the number of people in a family and/or the age of an employee; While not technically an HRA class, we recommend to do this modification on top of HRA class designations.
Helpful if: You want to solve for differing family sizes and age and make sure those employees get equitable benefits
Benefit: Equitable health care for employees
Combine classes
What you do: Put two or more classes in one group; you can combine any of the 11 designated classes as you like
Helpful if: Your employee populations have different needs, and you want to design a plan that is unique to your workforce
Benefit: Micro level of design to maximize budget
Offer an ICHRA to just new employees
What you do: Offer an ICHRA to employees who are new and in a waiting period
Helpful if: You want to test out ICHRA and/or include new employees in coverage
Benefit: Attract employees who would otherwise go without coverage during their waiting period
For international companies only: Provide ICHRA to U.S.-based employees
What you do: Offer your U.S.-based employees an ICHRA instead of a group plan.
Helpful if: You want to avoid the headache of a U.S. group plan
Benefit: Attract and retain U.S. employees
Getting expert support when designing HRA employee classes
Designing HRA employee classes is a really strong move for savvy business leaders, but we know it takes careful planning and strategic thinking.
That’s where Take Command comes in. Our experts can guide you through the design process to ensure you’re maximizing your budget and giving employees the best coverage possible.
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HRA employee classes FAQ
Who governs ICHRA employee classes?
HRA employee classes are jointly governed by the IRS, the U.S. Department of Labor, and the U.S. Department of Health and Human Services.
How much leverage does a company have in defining HRA classes?
A business has a lot of options in designing their plan within designated HRA classes, but a business cannot create a new class.
How does a business benefit from leveraging HRA class designs?
Leveraging HRA class designs helps businesses with budget efficiency, equitable benefits, ACA compliance, and simplified geographical coverage. You get maximum financial predictability because each class can have its own budget. You can offer equitable coverage by right-sizing health benefits by employee group instead of offering a one-size-fits-all plan. You can be ACA compliant by meeting affordability and minimum value standards for full-time workers and excluding certain classes in a compliant way. You get simplified geographical coverage because there is no need to manage a complex, multi-state group plan.
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I wrote this blog because I care about ideas (big and little) that can help fix our healthcare system. I used to work on projects for Kaiser Permanente and the Parkland Health & Hospital System so I've seen the system inside and out. It's so important that consumers keep up with industry shifts and changing health insurance regulations. I'm also Take Command Health's Content Editor and a busy mom. Learn more about me and connect with me on our about us page. Thanks!
