🎓 ICHRA School

Module 10: Annual Renewals

Module 10: The Annual Renewal Cycle

Overview: From Negotiation to Recalibration

In the traditional Group Health world, "The Renewal" is a dirty word. It is a moment of dread where you deliver a 15% rate hike, argue with the underwriter, and scramble to market the plan.

In the ICHRA world, renewal is different. It is not a Negotiation; it is a Recalibration.

Because the employer sets the budget, the renewal is no longer about "How much will the carrier charge us?" It is about "How much do we want to contribute this year?"

In this module, we will teach you how to manage the annual lifecycle of an ICHRA, ensuring your client stays compliant, your employees stay satisfied, and your agency gets paid.

1. The Paradigm Shift

The most important thing to understand is that the employer's liability does not increase automatically.

  • Group Renewal: Carrier says "Pay us 12% more or leave."
  • ICHRA Renewal: Carrier rates might go up 12%, but the Employer's contribution stays flat unless they choose to raise it.

The Strategic Danger

While this sounds great for the CFO, it creates a risk for the employees. If carrier rates rise by 12% and the employer keeps their contribution flat, the employee absorbs 100% of that increase.

  • Result: The plan becomes "Unaffordable" (by IRS standards) or simply "Unattractive" (by employee standards).
  • Your Job: You must guide the employer to find the "Goldilocks" Increase—enough to keep employees happy and the plan compliant, but less than a full Group trend increase.

2. The 90-Day "Affordability Reset"

This is the single most critical compliance step in the renewal process. The "Affordability" test is not a one-time event. It resets every single plan year.

The Math Problem

1. New Carrier Rates: The Lowest Cost Silver Plan (LCSP) for next year is released in late summer. It is almost always more expensive than this year.

2. New IRS Threshold: The IRS changes the required percentage (e.g., to 9.96% for 2026).

3. The Collision: If the LCSP price goes UP and the Employer Contribution stays FLAT, the plan might suddenly fail the affordability test, triggering potential Penalty A or Penalty B risks.

The Software Solution: The "Stress Test"

You do not need to calculate this manually. 90 days before renewal, you must run the Affordability Stress Test in your quoting platform.

1. Step 1: The software pulls the new LCSP rates for the client's zip codes.

2. Step 2: It plugs in the current employer allowance.

3. Step 3: It flags any employees who have dropped below the Safe Harbor line.

  • If Green: Great. You can renew as is.
  • If Red: You must present the client with the "Compliance Increase"—the minimum dollar amount they must add to the allowance to remain safe.

3. The 90-Day Notice Requirement

We covered this in Module 5, but it bears repeating here: You legally cannot renew an ICHRA without notifying employees.

  • The Rule: Employees must receive a Notice of Offer 90 days before the start of the new plan year.
  • The Content: It must state the new allowance amount for the upcoming year.
  • The Deadline: If the plan starts January 1st, the notice must go out by October 3rd.

Agent Action: Set your CRM to alert you 120 days out. If you wait until December 1st to discuss renewal, you have already missed the legal window to change the plan design compliance-free.

4. The Employee Experience: Auto-Renewal vs. Shopping

What happens to the employees? Do they have to pick a new plan every year?

Scenario A: Auto-Renewal (Passive)

Most individual health plans (Blue Cross, Oscar, etc.) have an "Auto-Renewal" feature.

  • How it works: If the employee does nothing, the carrier rolls them into the next year's version of their current plan.
  • The Risk: The premium will likely go up. The employee must check if their new premium is still covered by their allowance.

Scenario B: Active Shopping (Recommended)

Carriers enter and exit markets every year. The "Cheapest Silver Plan" in 2025 might be the "Most Expensive" in 2026.

  • Your Role: Encourage employees to check in with you during Open Enrollment (Nov 1 - Dec 15).
  • The Message: "Your allowance is $500. Last year, Blue Cross was the best deal. This year, Aetna might be better. Go look."

5. Client Retention: The "Stewardship Report"

How do you keep the client from firing you and going back to Group Health? You must prove the value of the ICHRA. Do not just send a renewal email. Schedule a Stewardship Meeting.

The Agenda

1. Budget vs. Actuals (The "Unused Funds" Argument)

"Mr. Client, we projected you would spend $500,000. But because 10% of your staff waived coverage and opted for spousal plans, you only spent $420,000. You saved $80,000 in cash. In a Group Plan, that money would be gone forever. In ICHRA, you kept it."

2. Inflation Shielding

"Group trend is +14% this year. We are recommending a +5% increase to your allowance to keep pace with inflation. You are beating the market by 9 points."

3. Compliance Check

"We passed your 1095-C filing and PCORI fees with zero issues."

The "Boomerang" Risk

Sometimes, a client will have a "good claims year" and think about going back to a self-funded group plan.

  • The Defense: Remind them of Volatility.

"Yes, you could go back to Group. But one bad cancer claim next year puts you right back in the hole. ICHRA is the only way to permanently cap your risk."

Module 10 Summary

1. Recalibration: Renewal is a math adjustment, not a negotiation. You set the budget, not the carrier.

2. The 90-Day Reset: You must re-issue the Notice of Offer 90 days before renewal (e.g., Oct 3rd) to trigger the new SEP and avoid non-compliance.

3. Affordability Stress Test: Use your quoting software to re-run LCSP data annually. If rates spike, you may need a "Compliance Increase" to keep the plan Affordable.

4. Active Shopping: Encourage employees to shop every year. The "Best Deal" changes annually as carriers enter/exit the market.

5. Retention: Use the Stewardship Report to show "Unused Funds." Prove that the employer saved money when employees waived coverage—a benefit unique to ICHRA.

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Module 10 References

  • Internal Revenue Service. (n.d.). 26 CFR § 54.9802-4 - Special rules for individual coverage health reimbursement arrangements (ICHRAs). Legal Information Institute. [https://www.law.cornell.edu/cfr/text/26/54.9802-4](https://www.law.cornell.edu/cfr/text/26/54.9802-4)
  • Internal Revenue Service. (2019, June 20). Health Reimbursement Arrangements and Other Account-Based Group Health Plans (Final Rule). Federal Register. [https://www.federalregister.gov/documents/2019/06/20/2019-12571/health-reimbursement-arrangements-and-other-account-based-group-health-plans](https://www.federalregister.gov/documents/2019/06/20/2019-12571/health-reimbursement-arrangements-and-other-account-based-group-health-plans)
  • Centers for Medicare & Medicaid Services. (n.d.). 45 CFR § 155.410 - Initial and Annual Open Enrollment Periods. Legal Information Institute. [https://www.law.cornell.edu/cfr/text/45/155.410](https://www.law.cornell.edu/cfr/text/45/155.410)