An ICHRA strategy starts with the employer’s workforce, budget, and benefits objectives. Before setting allowances or employee classes, the employer should understand what it is trying to achieve and how the arrangement will fit within its broader benefits approach.
Define the Employer Objective
Different employers may consider ICHRA for different reasons, including:
Establishing a more predictable health benefits budget
Supporting employees across multiple states or rating areas
Providing employees with greater individual plan choice
Moving away from a traditional group health plan
Introducing health benefits for the first time
Creating a benefits approach that can adapt as the workforce changes
The appropriate design depends on the employer’s circumstances. ICHRA is not automatically the right approach for every workforce.
Review the Workforce Before Designing the Plan
Workforce composition can affect employee classes, allowance design, affordability, enrollment timing, and administration.
Number of employees
Full-time and part-time populations
Work locations and rating areas
Age distribution
Family composition
Existing group health coverage
Employee eligibility patterns
Seasonal or variable workforce changes
For Applicable Large Employers, the strategy should also account for ACA employer shared responsibility and affordability requirements.
Establish the Budget Framework
The employer determines the amount it is prepared to make available through the ICHRA, subject to applicable plan rules.
Allowance decisions may be influenced by:
Overall benefits budget
Individual-market premiums in employee locations
Employee classes
Age and family-size variations permitted under ICHRA rules
Affordability considerations for Applicable Large Employers
Expected workforce growth or geographic expansion
The lowest-cost approach is not necessarily the most effective strategy. Allowance design should be evaluated together with employee access to qualifying individual health insurance coverage and the employer’s broader benefits objectives.
Consider Administration Early
Plan design decisions affect more than the initial setup. Employee onboarding, eligibility changes, notices, enrollment, coverage verification, premium-payment administration, recordkeeping, and annual plan-year updates all need to work within the selected structure.
A simpler design may be easier to administer and communicate, while a more segmented strategy may provide greater flexibility for employers with complex or geographically distributed workforces.
Review the Strategy Before Implementation
Before implementation, the employer should confirm that the proposed approach aligns with its workforce, budget, plan documents, employee communications, and applicable compliance requirements.
Related guidance may include Workforce Design, Employee Class Design, and Allowances.
Lirvion provides administrative and educational support and does not provide legal, tax, or financial advice. Employers remain responsible for plan-design decisions and should consult qualified legal, tax, or benefits professionals regarding their specific circumstances.