🎓 ICHRA School

Module 12: Failure & Disaster Recovery

Module 12: Operational Failure Modes & Disaster Recovery

Overview: The Crisis Playbook

You have designed a compliant Class structure. You have calculated Affordability to the penny. You have trained the employees on how to shop.

And yet, on January 5th, your phone will ring.

  • An employee went to the pharmacy, and their coverage wasn't active.
  • An employer got a confused letter from the IRS.
  • A carrier rejected a binder check.

This module is your Crisis Playbook. It details the most common failure modes in the ICHRA ecosystem—where money, data, and human behavior collide—and provides the specific remediation steps to save the client (and your reputation).

1. The Money Failures

Money movement is the single most fragile point in the ICHRA ecosystem. Unlike Group Health, where a single large check covers everyone, ICHRA relies on dozens of micro-transactions.

Failure A: The Binder Payment Gap

  • The Scenario: An employee enrolls on December 15th for a January 1st start. The carrier requires the first month's premium ("Binder") by December 31st. The employee (or the TPA) sends the payment on January 2nd.
  • The Consequence: Cancellation Ab Initio. The carrier cancels the policy as if it never existed. Under federal law (45 CFR § 155.400(e)), there is no grace period for the first payment. The employee is now uninsured and locked out until the next Open Enrollment.
  • The Fix:

1. Immediate Appeal (Unlikely): Call the carrier's broker support line. If the payment failed due to a bank error, you might have grounds for a ticket.

2. The "Life Event" Hail Mary: Did the employee have another Qualifying Life Event (QLE) recently (marriage, move, loss of other coverage)? If so, use that QLE to re-enroll them for a February 1st start.

3. The Short-Term Bridge: If no QLE exists, the employee must purchase Short-Term Medical coverage until the next Open Enrollment. This is not ICHRA-compliant/reimbursable, but it prevents catastrophic exposure.

Failure B: The "Check Ban" Rejection

  • The Scenario: To make things "easy," the employer collects employee premiums and mails a stack of checks to the carrier on their behalf.
  • The Consequence: The carrier returns the checks uncashed two weeks later, citing "Third-Party Payment" restrictions (45 CFR § 156.1250). By the time the checks return, the binder deadline has passed. Coverage is void.
  • The Fix:

1. Prevention: Never allow an employer to mail checks to an individual carrier. Use the TPA Aggregation feature in your platform or require employees to pay directly.

2. Emergency Wire: If caught before the deadline, the employee must pay immediately via personal credit card. The employer can reimburse them via payroll later.

2. The Data Failures

Data mismatches between the Exchange (Healthcare.gov), the Carrier, and the IRS cause "silent failures" that only surface months later.

Failure C: The "Split Household" Clawback

  • The Scenario: A husband is offered an ICHRA. His wife and kids are not offered ICHRA. The husband enrolls in the ICHRA. The wife goes to the Exchange and takes a Premium Tax Credit (APTC) for herself and the kids.
  • The Consequence: Tax Disaster. If they file taxes Jointly, the household income definition gets messy. While the wife is eligible for a subsidy (because she wasn't offered ICHRA), the sheer complexity of reconciling one tax return with both ICHRA (Form 1095-B) and APTC (Form 1095-A) leads to IRS audit flags.
  • The Fix:

1. CPA Intervention: Do not try to be their accountant. Advise them to see a CPA immediately.

2. The "Married Filing Separately" Trap: Warn them that filing separately usually disqualifies them from any Premium Tax Credits.

Failure D: The SSN/Name Mismatch

  • The Scenario: The employer's census has "Bob Smith," but his legal name on his Social Security card is "Robert Smith." Or, the DOB is off by one day.
  • The Consequence: The TPA's roster file fails to match the Carrier's enrollment file. The premium reimbursement is blocked because the system can't verify the policy exists. Bob gets charged full price on his credit card and gets angry.
  • The Fix:

1. The "Show Me The Card" Rule: Require employees to upload a photo of their insurance ID card to your platform immediately.

2. Manual Override: Use your TPA dashboard to manually "match" the policy to the employee to force the reimbursement through while the data is corrected.

3. The Human Failures

The variable that breaks most often is the employee.

Failure E: The "Double Dip"

  • The Scenario: An employee accepts the ICHRA offer but also unknowingly accepts a Premium Tax Credit (APTC) on the Exchange because they liked the lower monthly price.
  • The Consequence: IRS Clawback. The employee is receiving double federal benefits (tax-free reimbursement + tax credit). When the employer files Form 1095-C proving the ICHRA offer was affordable, the IRS will demand the employee repay every dollar of the subsidy they received.
  • The Fix:

1. The Warning Letter: Send a formal notice to the employee: "Our records show you are enrolled in ICHRA. You MUST update your Marketplace application to indicate you have an offer of employer coverage."

2. Document the Offer: Ensure the employee's signed "Attestation" is saved in your platform. This protects the employer from the penalty; the liability falls 100% on the employee.

Failure F: The "I Forgot to Pay" Cancellation

  • The Scenario: An employee sets up autopay on an expired credit card. The payment fails. The carrier sends a grace period notice (usually 30-90 days for renewals). The employee ignores it. Coverage is terminated.
  • The Consequence: The TPA stops reimbursing because the policy is inactive. The employee begs for reinstatement.
  • The Fix:

1. The Reinstatement Appeal: If within 30 days of termination, some carriers allow reinstatement if all back-premiums are paid instantly.

2. The "Loss of Coverage" Loophole: Termination for non-payment is NOT a Qualifying Life Event. The employee cannot simply "re-enroll." They are uninsured until January 1st.

4. The Recovery Toolkit

When disaster strikes, use these protocols.

Protocol 1: The "Effectuation Audit"

Run this on January 10th.
  • Action: Pull a report from your platform of all employees with "Pending" policy status.
  • Step: Email every employee on that list: "URGENT: Your carrier has not confirmed your payment. Please log in to your carrier portal and confirm your Binder Payment was processed. If not, pay immediately."

Protocol 2: The "Affordability Defense" File

Run this annually.
  • Action: Save a PDF of the "Lowest Cost Silver Plan" (LCSP) rates for every zip code where you have employees.
  • Why: Two years from now, when the IRS questions the 2025 affordability, you cannot look up 2025 rates online anymore. You must have the timestamped evidence saved locally.

Module 12 Summary

1. Binder Failure: If an employee misses the first payment, coverage is void (Cancellation Ab Initio). The only fix is often a Payroll Advance or a Short-Term Medical bridge.

2. Double Dip: If an employee takes ICHRA + Subsidy, the IRS claws it back. Use the software to store the Attestation to protect the employer.

3. Check Ban: Carrier returns employer checks. Use TPA Aggregation or Employee Pay & Reimburse.

4. SSN Mismatch: If names/DOBs don't match, reimbursement stops. Use the ID Card Upload feature to force a match.

5. Effectuation Audit: On Jan 10th, audit the roster for unpaid binders and alert employees immediately.

Module 12 References

  • Third-Party Payments (Check Ban): 45 CFR § 156.1250 - Acceptance of certain third party payments.

[https://www.ecfr.gov/current/title-45/subtitle-A/subchapter-B/part-156/subpart-M/section-156.1250](https://www.ecfr.gov/current/title-45/subtitle-A/subchapter-B/part-156/subpart-M/section-156.1250)

  • Binder Payments (No Grace Period): 45 CFR § 155.400(e) - Enrollment of qualified individuals into QHP.

[https://www.ecfr.gov/current/title-45/subtitle-A/subchapter-B/part-155/subpart-E/section-155.400](https://www.ecfr.gov/current/title-45/subtitle-A/subchapter-B/part-155/subpart-E/section-155.400)

  • Employer Mandate Reporting: Instructions for Form 1095-C.

[https://www.irs.gov/forms-pubs/about-form-1095-c](https://www.irs.gov/forms-pubs/about-form-1095-c)

  • Premium Tax Credit Rules: Instructions for Form 8962.

[https://www.irs.gov/forms-pubs/about-form-8962](https://www.irs.gov/forms-pubs/about-form-8962)

Appendix: Strategic Artifacts & Cheat Sheets

Usage: These addendums are designed as "tear-out" reference guides. Print them, laminate them, or save them to your desktop for quick access during client consultations.

Addendum A: The Affordability Math Cheat Sheet

The Golden Rule: An ICHRA is "Affordable" if the Employee's Contribution for the Lowest Cost Silver Plan (LCSP) does not exceed the IRS threshold of their monthly household income.

The Thresholds

  • 2024: 8.39%
  • 2025: 9.02%
  • 2026 (Current): 9.96%

The Formula

$$(\text{LCSP Premium} - \text{ICHRA Allowance}) \div \text{Monthly Income} \le \text{Threshold \%}$$

The 3 Safe Harbor Methods (Example Scenarios)

1. The "Federal Poverty Line" (FPL) Method

1. Best For: Simplicity. If you pass this, you pass for everyone.

2. The Math (2025 Mainland FPL approx $15,060):

  • Monthly FPL Income: ~$1,255
  • Max Employee Cost (9.96%): ~$125/month

3. The Rule: If the employee pays $125 or less for the Silver Plan, the plan is affordable.

4. Example:

  • LCSP Premium (Age 40): $500
  • Required Employer Allowance: $375 ($500 - $125)
2. The "Rate of Pay" Method

1. Best For: Hourly workforces where hours fluctuate.

2. The Math: (Hourly Rate x 130 Hours) x Threshold %

3. Example:

  • Employee makes $15.00/hour
  • Deemed Monthly Income: $15 x 130 = $1,950
  • Max Employee Cost (9.96%): $194.22

4. The Rule: The employee cannot pay more than $175.89 for the Silver Plan.

3. The "W-2" Method

1. Best For: Salaried/Commissioned employees where you need every inch of room.

2. The Risk: You don't know the exact Box 1 W-2 number until the year ends.

3. The Rule: (Box 1 Wages / 12) x Threshold %.

Addendum B: The Pre-Tax Decision Matrix

Problem: Can we deduct the employee's share of the premium from their paycheck Pre-Tax (Section 125)?

If the Employee Buys Here... | Then the Payroll Deduction is... | Strategic Impact

Healthcare.gov (On-Exchange) | 🛑 POST-TAX | Simple Shopping. Employees get a one-stop-shop experience, but lose ~30% tax savings on their contribution. Best for low-allowance plans.

Carrier Direct (Off-Exchange) | ✅ PRE-TAX | Max Tax Savings. Requires a Section 125 POP Amendment. Shopping is harder (must use broker tool or carrier site). Best for high-income groups.

State Exchange (SBE) | 🛑 POST-TAX | Generally treated same as Federal Exchange. Check local state (CA, NJ, PA) rules for exceptions.

Addendum C: The TPA Audit

Instruction: Do not sign a contract with a TPA until they confirm they can facilitate or Automate the following. If they say "We do this manually," walk away.

  • [ ] Generate SEP Notice: Can they click a button to create the legal document that unlocks the Special Enrollment Period?
  • [ ] Create ICHRA Plan Design Documents: Generate required documents for the employer to store explaining the group health plan.
  • [ ] Accept Binder Payment Receipt: Can their system read a "first month" payment receipt (Binder) as valid proof of coverage?
  • [ ] Track Employee Monthly Attestation: Will they gather and track monthly employee statements to validate they are still paying for valid coverage?
  • [ ] Track Employee Hiring and Class Changes: To start, stop, or change the employer contribution?
  • [ ] Generate Form 1094-C / 1095-C: Do they create the PDF files ready for the IRS?
  • [ ] Generate Form 720 (PCORI): Will they calculate the "Average Covered Lives" fee for you?
  • [ ] Generate Form 5500: Do they have a partner or system to create this ERISA report for large groups?
  • [ ] 90-Day Renewal Notice: Will the system auto-email employees 90 days before the next plan year?
  • [ ] Auto-Removal: If an employee is terminated in the payroll system, does the TPA automatically stop reimbursements?

Addendum D: Client Handout - The Employee "Bill of Responsibilities"

To the Employee:

Welcome to your new personalized health plan! Unlike the old "Group Plan" where the company did everything, an ICHRA empowers you to pick your own coverage. With that power comes responsibility.

1. The "Truth" Requirement (Monthly Attestation)

1. What to do: Every month, you will receive an email/text asking if you still have insurance. You must click "YES."

2. Why: If you do not click, the IRS forbids us from sending your reimbursement. No Click = No Money.

2. The "Pay Your Bill" Rule

  • The Danger: Individual insurance plans cancel immediately if you miss a payment. There is no long grace period.
  • The Fix: Set up Auto-Pay on your personal credit card. Do not rely on manual checks.

3. The "Tax Trap" (Premium Tax Credits)

  • The Rule: Because your employer is giving you money for health insurance, you CANNOT take a tax credit (subsidy) from the government.
  • Action: If you buy on Healthcare.gov, you must tell them you have an "Affordable ICHRA Offer." If you take the subsidy anyway, the IRS will make you pay it all back next April.

4. Reporting Changes

  • Notify the TPA Immediately If:
  • You get married or divorced.
  • You have a baby.
  • Your insurance policy cancels.
  • You move to a new zip code.

Addendum E: The Art of Classification: ICHRA Class Design Strategy Guide

If ICHRA is the engine of the benefits revolution, Class Design is the steering wheel.

Most agents treat the 11 permitted ICHRA classes as a boring compliance list. This is a mistake. The ability to segment your workforce is the single most powerful strategic tool you have. It allows you to move from "One-Size-Fits-None" (Traditional Group) to "Precision Benefits" (ICHRA).

This guide is your masterclass in Strategic Classification. It will teach you how to use class design not just to follow the rules, but to solve specific business problems—boosting retention, slashing waste, and giving employees a benefit they actually value.

1. The Strategic Framework: Why Segment?

Before you pick a class, you must define the goal.

🏢 For the Employer: "Budget Precision"

  • The Problem: In a Group Plan, you often overpay for entry-level staff just to keep the plan attractive for executives (or vice-versa).
  • The Class Solution: You can budget differently for different value drivers.
  • High-Value Talent (Salaried/Execs): High Contribution.
  • High-Turnover Staff (Hourly/Seasonal): Sustainable Contribution.
  • The Result: You stop "lighting money on fire" for employees who don't value the benefit, while doubling down on those who do.

👤 For the Employee: "Relevance"

  • The Problem: A 22-year-old single employee hates paying $200/month for a "Gold" plan they never use. A 55-year-old with a family hates the "Bronze" plan because the deductible is too high.
  • The Class Solution: By segmenting classes (and using age-banding), you give each group the purchasing power to buy what fits their life stage.
  • The Result: The benefit feels "personal" rather than "mandatory."

2. The Power Classes: Tactical Use Cases

The IRS allows 11 classes. You will mostly use these four. Here is how to weaponize them.

A. The "New Hire" Class (The Sunset Strategy)

The Scenario: A client has a 5-year-old Group PPO plan. The 20 existing employees love it. The employer wants to save money but is terrified of a mutiny if he cancels the PPO. The Move:

1. Class 1 (Legacy Employees): Keep them on the Group PPO. (Status Quo = No Mutiny).

2. Class 2 (New Hires): Define a class for "Employees hired on or after Jan 1, 202X." Offer them ICHRA. The Benefit:

  • Employer: Caps risk immediately. New hires have no expectation of the "old plan," so they are happy with the cash. Over 3-5 years, attrition naturally shrinks the expensive Group pool to zero.
  • Employee: New hires get immediate choice and portability.
B. The "Geographic" Class (The Remote Fix)

The Scenario: HQ is in Boston. They have a great local HMO. They hire a VP of Sales in Ohio and a Dev Team in Texas. The Boston HMO has zero network there. The Move:

1. Class 1 (MA Residents): Keep on the Group HMO.

2. Class 2 (Non-MA Residents): Offer ICHRA based on "Rating Area." The Benefit:

  • Employer: Solves the "Out-of-Area" network nightmare without buying a national PPO that costs 30% more.
  • Employee: The Ohio VP buys a local Cleveland Clinic plan. The Texas Devs buy Blue Cross TX. Everyone gets local, high-quality care.
C. The "Hourly vs. Salaried" Split (The Participation Fix)

The Scenario: A manufacturing plant. 10 Office Staff (Salaried) want a rich plan. 50 Line Workers (Hourly) refuse to enroll because the premium deduction is too high. Participation drops below 75%, threatening the group contract. The Move:

1. Class 1 (Salaried): Keep on Group Plan (100% participation).

2. Class 2 (Hourly): Offer ICHRA. The Benefit:

  • Employer: Saves the Group contract for the office staff. Stops sweating over participation rates (ICHRA has no participation minimums*).
  • Employee: Hourly workers get a budget. If they find a cheap Bronze plan, great. If they waive and go to the Exchange for a subsidy (if the ICHRA is unaffordable), also great. They have options.
D. The "Part-Time" Carve-Out

The Scenario: An employer wants to be generous and offer benefits to part-timers (20-29 hours), but can't afford the full Group rate. The Move:

  • Class 1 (Full-Time): Group Plan or High-ICHRA ($500).
  • Class 2 (Part-Time): Low-ICHRA ($200). The Benefit:
  • Employer: Powerful recruiting tool for part-time labor in a tight market.
  • Employee: Gets $200 tax-free help they wouldn't get otherwise.

3. Advanced Optimization: Fine-Tuning the Offer

💡 PRO-TIP: Always Use the 1:3 Age Band

The Trap: Offering a flat $500 to everyone.

  • Result: The 24-year-old gets a Platinum plan for $0. The 60-year-old gets a Bronze plan and still owes $400/month. This feels unfair. The Fix: Scale the allowance by age (up to a max of 3x).
  • Age 21-29: $300/mo
  • Age 30-49: $500/mo
  • Age 50+: $900/mo Why: It creates Equity of Purchase Power. Everyone can buy roughly the same "Silver Plan" regardless of their age.
🛑 COMPLIANCE ALERT: The "Hybrid" Size Rule

If (and only if) you offer a Group Plan to one class and ICHRA to another, the ICHRA class must be big enough.

  • < 100 Employees: ICHRA Class must have 10+ people.
  • 100-200 Employees: ICHRA Class must be 10% of total.
  • > 200 Employees: ICHRA Class must have 20+ people.
  • Watch out for the "New Hire" class! It starts small. Ensure you have a plan to reach 10 lives quickly, or use "Rating Areas" to bridge the gap legally.

4. Summary Checklist for Agents

When designing classes, ask these 3 questions:

1. "Who do you want to keep?" (Design the richest class for them).

2. "Who is driving your cost increase?" (Move them to ICHRA or a lower-contribution class).

3. "Where do your people live?" (Use Geographic classes to solve network issues).

The Golden Rule: Class design is not about discriminating against people; it is about discriminating between risk pools to optimize value for everyone.

Addendum F: Employee Communication Templates (Copy/Paste for HR)

Instructions: These templates are designed for your HR contact. They should customize the [bracketed text] and send these emails to employees to ensure a smooth rollout.

Template 1: The "Announcement" Email

Subject: Big News! We are upgrading your health benefits next year.

To: All Employees From: Leadership Team

Team,

Every year, we look for ways to improve our benefits package to better support you and your families. For too long, our traditional group health plan has forced everyone into a "one-size-fits-all" solution that didn't actually fit anyone perfectly.

This year, we are excited to announce a major upgrade. We are moving to a new model called an Individual Coverage HRA (ICHRA).

What does this mean for you? Instead of the company picking one plan for everyone, you get to pick the plan that fits you best.

  • More Choice: You can choose from dozens of plans from major carriers like Blue Cross, United, Aetna, and others.
  • Your Budget: The company will give you a tax-free monthly allowance of $[Amount] to pay for your plan.
  • Portability: If you leave the company, you can keep your insurance plan. It belongs to you, not us.

We know change brings questions. We have hired a dedicated team of experts to help you shop, compare plans, and enroll.

Next Steps: Please mark your calendars for our Company Town Hall on [Date] at [Time], where we will explain exactly how this works and how to get started.

Template 2: The "Town Hall" Invite Script

Subject: MANDATORY: Open Enrollment Town Hall

When: [Date/Time] Where: [Zoom Link / Conference Room]

Team,

Please join us for a mandatory meeting regarding your health insurance for next year. Our benefits advisor, [Agent Name], will be walking us through the new platform and explaining how to use your new monthly allowance.

Agenda:

1. How to claim your account.

2. How to shop for plans (and how to keep your current doctors).

3. Important: Why you must STOP any federal tax credits you are currently receiving.

Please bring your questions!

Template 3: The "Urgency" Reminder (1 Week Out)

Subject: ACTION REQUIRED: Health Insurance Enrollment Ends in 7 Days!

Team,

This is a final reminder that Open Enrollment closes on [Date].

If you have not yet selected a plan and linked it to the ICHRA platform, you must do so by [Date].

Warning:

  • If you do not enroll by the deadline, you will NOT have health insurance coverage through the company for the upcoming year.
  • The platform will close at midnight on [Date].

Need Help? Contact our support team at [Phone/Email] or book a session with [Agent Name] here: [Link].

Don't wait until the last minute!

Template Onboarding Letter

Your Guide to the New Health Benefit: Understanding Your ICHRA

Welcome to your new healthcare benefit! This year, your employer is upgrading from a traditional, "one-size-fits-all" group health insurance plan to a personalized benefit called an ICHRA (Individual Coverage Health Reimbursement Arrangement).

If you've never heard of an ICHRA before, don't worry. This guide will explain exactly what it is, why it’s a massive upgrade for you and your family, and how to easily navigate your new options.

What is an ICHRA?

Think of an ICHRA like a 401(k) for your health insurance.

In the past, your employer picked one or two health insurance plans and hoped it worked for everyone. With an ICHRA, your employer is instead giving you a tax-free monthly allowance to go out and buy the exact health insurance plan that fits your specific needs.

You choose the carrier, you choose the coverage level, and your employer helps foot the bill.

Why is this good for me?

Moving to an ICHRA gives you unprecedented control over your healthcare. Here are the top benefits:

1. Ultimate Choice You are no longer stuck with the single insurance carrier your employer selected. You can choose from any eligible plan available on the individual market in your area. Want BlueCross? Great. Prefer UnitedHealthcare or Kaiser? It's entirely up to you.

2. Keep Your Doctors One of the biggest frustrations with traditional group plans is having to change doctors when your employer changes insurance companies. Because you now pick your own plan, you can search specifically for a network that includes your favorite primary care physicians and specialists.

3. Portability (You Own the Plan) Because you are purchasing an individual health insurance plan, you own it. If you ever leave your job, change careers, or retire, you don't have to scramble for expensive COBRA coverage. You simply keep your plan and take over the monthly premiums yourself.

4. Tax-Free Money The allowance your employer provides is completely tax-free. It does not count as taxable income on your W-2.

How the Money Works

The financial mechanics are very simple:

1. Your Allowance: Your employer will notify you of your set monthly allowance amount.

2. You Shop: You will shop for a qualifying individual health insurance plan.

3. The Math:

  • If you pick a plan that costs less than your allowance: Your premium is fully covered! (Note: You do not get to keep the remaining cash difference).
  • If you pick a plan that costs more than your allowance: The remaining balance will simply be deducted from your paycheck to cover the difference. In most cases, this is done on a pre-tax basis.

How to Choose the Right Plan for You

Because you have so many choices, shopping can feel a little overwhelming at first. Here is a simple checklist to help you pick the perfect plan:

Step 1: Check Your Providers

Before falling in love with a plan, look up its provider directory. Make sure your primary care doctor, your kids' pediatrician, and any necessary specialists are "In-Network."

Step 2: Check Your Prescriptions

If you take regular medications, look at the plan’s "Formulary" (the list of covered drugs). Make sure your specific medications are covered and check what "Tier" they are in so you know what your copay will be.

Step 3: Balance Your Monthly Cost vs. Care Needs

Plans are categorized by "Metal Tiers" (Bronze, Silver, Gold, Platinum). You need to decide what is more important for your current stage of life:

  • Bronze Plans: Lowest monthly premiums, but highest deductibles. Great if you are generally healthy and just want protection against major emergencies.
  • Silver Plans: The "sweet spot." Moderate premiums and moderate deductibles.
  • Gold/Platinum Plans: Highest monthly premiums, but very low out-of-pocket costs. Great if you visit the doctor frequently, have an upcoming surgery, or take expensive medications.

What Happens Next?

Your benefits advising team is here to help make this transition seamless. Here is what you need to do next:

1. Review Your Notice: Look out for your official "Employer Notice" which will state your exact monthly allowance.

2. Shop for a Plan: During your Open Enrollment window, visit the marketplace or use our designated enrollment platform to browse your options.

3. Enroll & Submit Proof: Once you select a plan, you will need to submit your proof of coverage to our Third-Party Administrator (TPA). This is a required step so they can legally release your employer's tax-free funds to pay for your plan!

Need Help? We are here!

By law, your employer cannot tell you which health plan to pick. However, as your dedicated benefits advising team, we can. If you need help checking if your doctor is in-network, figuring out the math, or just want advice on which Metal Tier is best for your family, please reach out to us!

[Insert Agency Name] Phone: [Insert Phone Number] Email: [Insert Email Address] Website: [Insert Booking Link]

Addendum G: Example 90 day notice

[Employer Name]

Individual Coverage HRA Required Notice

USE THIS NOTICE WHEN APPLYING FOR INDIVIDUAL HEALTH INSURANCE COVERAGE

Date: [Date of Notice]

You are getting this notice because your employer is offering you an individual coverage health reimbursement arrangement (HRA). Please read this notice before you decide whether to accept the HRA. In some circumstances, your decision could affect your eligibility for the premium tax credit. Accepting the individual coverage HRA and improperly claiming the premium tax credit could result in tax liability.

This notice also has important information that the Exchange (known in many states as the "Health Insurance Marketplace") will need to determine if you are eligible for advance payments of the premium tax credit. An Exchange operates in each state to help individuals and families shop for and enroll in individual health insurance coverage.

You may also need this notice to verify that you are eligible for a special enrollment period to enroll in individual health insurance coverage outside of the annual open enrollment period in the individual market.

What should I do with this notice?

Read this notice to help you decide if you want to accept the HRA.

Also, keep this notice for your records. You'll need to refer to it if you decide to accept the HRA and enroll in individual health insurance coverage, or if you turn down the HRA and claim the premium tax credit on your federal income tax return.

I. The Basics

What's an individual coverage HRA?

An individual coverage HRA is an arrangement under which your employer reimburses you for your medical care expenses (and sometimes your family members' medical care expenses), up to a certain dollar amount for the plan year. If you enroll in an individual coverage HRA, you must also be enrolled in individual health insurance coverage or Medicare Part A (Hospital Insurance) and B (Medical Insurance) or Medicare Part C (Medicare Advantage) (collectively referred to in this notice as Medicare) for each month you are covered by the HRA. If your family members are covered by the HRA, they must also be enrolled in individual health insurance coverage or Medicare for each month they are covered by the HRA. See Schedule A of Benefits and Eligible Expenses from the ICHRA Summary Plan Description provided to you by your Employer.

The individual coverage HRA you are being offered is employer-sponsored health coverage. This is important to know if you apply for health insurance coverage on the Exchange.

Note: There are different kinds of HRAs. The HRA that's being referred to throughout this notice, and that your employer is offering you, is an individual coverage HRA. It is not a qualified small employer health reimbursement arrangement (QSEHRA) or any other type of HRA.

What are the basic terms of the individual coverage HRA that my employer is offering?

This individual coverage HRA reimburses individual health insurance premium.

[Class Name 1, e.g., Eligible Salaried Employee]:

1. The maximum dollar amount available for employee only in the HRA is $[Amount] annually.

2. The maximum dollar amount available for employee plus qualified dependents in the HRA is $[Amount] annually.

[Class Name 2, e.g., Eligible Full-Time Employee]:

1. The maximum dollar amount available for employee only in the HRA is $[Amount] annually.

2. The maximum dollar amount available for employee plus qualified dependents in the HRA is $[Amount] annually.

Waiting Period: You are eligible to participate in the Plan on the first day following completion of [Number] consecutive days of active employment and if you are regularly work [Number] or more hours per week as an Eligible Employee.

Note that the self-only HRA amount available for the plan year, which is the amount you should tell the Exchange is available to you as an [Class Name], is $[Amount] annually. If you apply for individual health insurance coverage through the Exchange, this is the amount the Exchange will use to figure out if your HRA is considered affordable. Benefits are available Monthly and Prorated Monthly for short plan years or mid-year enrollment.

2. Your family members [are/are not] eligible for the HRA.

3. In general, your HRA coverage will start [Plan Start Date, e.g., January 1, 2026]. However, if you become eligible for the HRA less than 90 days before the beginning of the plan year or during the plan year, your HRA coverage will start [Plan Start Date] or within 90 days of this date or your mid-year effective date as a new hire. Individual coverage HRA benefits become available as soon as your qualifying health insurance is effective.

4. The HRA plan year begins on [Date] and ends on [Date].

5. Amounts newly made available under the HRA will be made available on the first day of each month.

Note: You will need this information if you apply for health insurance coverage through the Exchange.

Can I opt out of the individual coverage HRA?

Yes. You can opt out of the HRA for yourself (and your family members, if applicable). The opt-out provision is available during annual open enrollment, when qualifying health insurance terminates, termination of employment, and during qualifying events such as the individual market's annual open enrollment period from November 1 through December 15 or during other special open enrollment periods. Upon termination all unused individual coverage HRA funds are forfeited.

If I accept the individual coverage HRA do I need to be enrolled in other health coverage too?

Yes. You (and your family members, if applicable) must be enrolled in individual health insurance coverage or Medicare for each month you (or your family members) are covered by the HRA. You may not enroll in short-term, limited-duration insurance or only in excepted benefits coverage (such as insurance that only provides benefits for dental and vision care) to meet this requirement.

II. Getting Individual Health Insurance Coverage

How can I get individual health insurance coverage?

If you already have individual health insurance coverage, you do not need to change that coverage to meet the HRA's health coverage requirement.

If you don't already have individual health insurance coverage, you can enroll in coverage through the Exchange or outside of the Exchange - for example, directly from an insurance company.

Note: People in most states use HealthCare.gov to enroll in coverage through the Exchange, but some states have their own Exchange. To learn more about the Exchange in your state, visit https://www.healthcare.gov/marketplace-in-your-state/.

If you are enrolled in Medicare Part A and B or Medicare Part C, your enrollment in Medicare will meet the HRA's health coverage requirement. For information on how to enroll in Medicare, visit www.medicare.gov/sign-up-change-plans.

When can I enroll in individual health insurance coverage?

Generally, anyone can enroll in or change their individual health insurance coverage during the individual market's annual open enrollment period from November 1 through December 15. (Some state Exchanges may provide additional time to enroll.) If your individual coverage HRA starts on January 1, you (and your family members, if applicable), generally should enroll in individual health insurance coverage during open enrollment.

In certain circumstances, such as when your individual coverage HRA starts on a date other than January 1 or if you are newly hired during the HRA plan year, you (and your family members, if applicable) can enroll in individual health insurance coverage outside of open enrollment using a special enrollment period.

If you qualify for a special enrollment period, make sure you enroll on time:

  • If you are newly eligible for HRA coverage that would start at the beginning of the HRA plan year, you generally need to enroll in individual health insurance coverage within the 60 days before the first day of the HRA plan year.
  • If the HRA was not required to provide this notice 90 days before the beginning of the plan year, or you are newly eligible for HRA coverage that would start mid-plan year (for example, because you are a new employee), you may enroll in individual health insurance coverage up to 60 days before the first day that your HRA can start or up to 60 days after this date. Enroll in individual health insurance coverage as soon as possible to get the most out of your individual coverage HRA.

Note: If you enroll in individual health insurance coverage through this special enrollment period, you may need to submit a copy of this notice to the Exchange or the insurance company to prove that you qualify to enroll outside of the open enrollment period. For more information on special enrollment periods, visit HealthCare.gov or the website for the Exchange in your state.

Do I need to get new individual health insurance coverage each year if I want to enroll in my individual coverage HRA each year?

Yes. Individual health insurance coverage is typically sold for a 12-month period that is the same as the calendar year and ends on December 31. If your HRA starts on January 1, you will either need to get new individual health insurance coverage or re-enroll in your individual health insurance coverage. If your HRA has a plan year that starts on a day other than January 1, because your individual health insurance coverage will stay in effect until December 31, you do not need to get new individual health insurance coverage or re-enroll until the next open enrollment period.

If you are enrolled in Medicare, your Medicare coverage generally will remain in place year to year.

Do I need to substantiate my (and my family member's) enrollment in individual health insurance coverage or Medicare to the individual coverage HRA?

Yes. You must substantiate that you (and your family members, if applicable) will be enrolled in individual health insurance coverage or Medicare for the period you will be covered by the HRA. Substantiation of coverage should be submitted to [Contact Name] on the form included with this notice no later than the individual coverage HRA effective date.

Also, each time you seek reimbursement of a medical care expense from the HRA, you must substantiate that you had (or have) (or the family member whose medical care expense you are seeking reimbursement for, if applicable had (or has)) individual health insurance coverage or Medicare for the month during which the expense was incurred. The substantiation form is attached to this notice for your convenience.

What happens if I am (or one of my family members is) no longer enrolled in individual health insurance coverage or Medicare?

If you (or a family member, if applicable) are no longer enrolled in individual health insurance coverage or Medicare, the HRA won't reimburse you for medical care expenses that were incurred during a month when you (or your family member, as applicable) did not have individual health insurance coverage or Medicare. This means that you may not seek reimbursement for medical care expenses incurred when you (or your family member, if applicable) did not have individual health insurance coverage or Medicare.

Note: You must report to the HRA if your (or your family member's) individual health insurance coverage or Medicare has been terminated retroactively and the effective date of the termination.

III. Information About the Premium Tax Credit

What is the premium tax credit?

The premium tax credit is a tax credit that helps eligible individuals and their families pay their premiums for health insurance coverage purchased through the Exchange. The premium tax credit is not available for health insurance coverage purchased outside of the Exchange. Factors that affect premium tax credit eligibility include enrollment in Exchange coverage, eligibility for other types of coverage, and household income.

When you enroll in health insurance coverage through the Exchange, the Exchange will ask you about any coverage offered to you by your employer, including through an HRA. Your ability to claim the premium tax credit may be limited if your employer offers you coverage, including an HRA.

The Exchange also will determine whether you are eligible for advance payments of the premium tax credit, which are amounts paid directly to your insurance company to lower the cost of your premiums. For more information about the premium tax credit, including advance payments of the premium tax credit and premium tax credit eligibility requirements, see irs.gov/aca.

If I accept the individual coverage HRA, can I claim the premium tax credit for my Exchange coverage?

No. You may not claim the premium tax credit for your Exchange coverage for any month you are covered by the HRA. Also, you may not claim the premium tax credit for the Exchange coverage of any family members for any month they are covered by the HRA.

If I opt out of the individual coverage HRA, can I claim the premium tax credit for my Exchange coverage?

It depends.

  • If you opt out of the HRA and the HRA is considered unaffordable you may claim the premium tax credit for yourself and any family members enrolled in Exchange coverage if you are otherwise eligible.
  • If you opt out of the HRA and the HRA is considered affordable, you may not claim the premium tax credit for yourself or any family members.

If you are a former employee, the offer of an HRA will not prevent you from claiming the premium tax credit (if you are otherwise eligible for it), regardless of whether the HRA is considered affordable and as long as you don't accept the HRA.

How do I know if the individual coverage HRA I've been offered is considered affordable?

The Exchange website will provide information on how to determine affordability for your individual coverage HRA. To find your state's Exchange, visit: https://www.healthcare.gov/marketplace-in-your-state/.

Do I need to provide any of the information in this notice to the Exchange?

Yes. Be sure to have this notice with you when you apply for coverage on the Exchange. If you're applying for advance payments of the premium tax credit, you'll need to provide information from the answer to "What are the basic terms of the individual coverage HRA my employer is offering?" on page 2 above. You will also need to tell the Exchange whether you are a current employee or former employee.

If I'm enrolled in Medicare, am I eligible for the premium tax credit?

No. If you have Medicare, you aren't eligible for the premium tax credit for any Exchange coverage you may have.

IV. Other Information You Should Know

Who can I contact if I have questions about the individual coverage HRA?

Contact: [Employer Name], [Contact Name], [Phone Number]

Is the individual health insurance coverage I pay for with my individual coverage HRA subject to ERISA?

The individual health insurance coverage that is paid for with amounts from your individual coverage HRA, if any, is not subject to the rules and consumer protections of the Employee Retirement Income Security Act (ERISA). You should contact your state insurance department for more information regarding your rights and responsibilities if you purchase individual health insurance coverage.

ADDENDUM H: ICHRA PLAN DESIGN SPECIFICATIONS

IMPORTANT NOTICE: This document serves as a high-level overview and summary of the Plan Design specifications for agent and employee reference. It is NOT the full legal Plan Document or Summary Plan Description (SPD). In the event of any discrepancy between this summary and the official Plan Document, the official Plan Document shall govern.

Employer Name: [Employer Name] Plan Year: [Start Date] through [End Date]

SECTION 1: EMPLOYEE CLASSES & ELIGIBILITY

This section defines who is eligible for the plan. Employees must meet the definition of the specific "Class" to receive funds.

Class 1 Definition: [e.g., Full-Time Salaried Employees working 30+ hours] Class 2 Definition: [e.g., Full-Time Hourly Employees working 30+ hours] (Leave Class 2 blank if Plan is for all eligible employees equally)

Waiting Period: Eligibility begins on the first day of the month following [Number] days of active employment.

SECTION 2: SCHEDULE OF BENEFITS (ALLOWANCES)

The following monthly amounts are available to eligible employees to pay for substantiated individual health insurance premiums.

CLASS 1: [Insert Class Name, e.g., Salaried]

Tier | Monthly Allowance | Annual Max

Employee Only | $[Amount] | $[Amount x 12]

Employee + Spouse | $[Amount] | $[Amount x 12]

Employee + Children | $[Amount] | $[Amount x 12]

Employee + Family | $[Amount] | $[Amount x 12]

Note: Allowances are available on a monthly basis. Unused amounts [roll over / do not roll over] to the next month.

CLASS 2: [Insert Class Name, e.g., Hourly]

Tier | Monthly Allowance | Annual Max

Employee Only | $[Amount] | $[Amount x 12]

Employee + Spouse | $[Amount] | $[Amount x 12]

Employee + Children | $[Amount] | $[Amount x 12]

Employee + Family | $[Amount] | $[Amount x 12]

SECTION 3: ELIGIBLE EXPENSES (SCHEDULE A)

Funds in the ICHRA may ONLY be used for the following expenses. Any expense not listed here is ineligible.

Eligible Expenses:

1. Individual Health Insurance Premiums:

  • Major Medical Plans purchased on the Exchange (Marketplace).
  • Major Medical Plans purchased directly from a carrier.
  • Medicare Part A, B, C (Advantage), and D (Rx) premiums.
  • Medicare Supplement (Medigap) premiums.

Ineligible Expenses (Schedule B):

  • Out-of-Pocket Medical Costs: Copays, deductibles, coinsurance, and prescriptions are [Excluded / Included].
  • Non-Compliant Plans: Short-Term Medical Plans, Healthcare Sharing Ministries, and TRICARE.
  • Spouse's Group Plan: Premiums paid for a spouse's employer-sponsored group plan.
  • Dental/Vision Premiums: [Excluded / Included].

SECTION 4: REIMBURSEMENT METHOD

How employees receive funds: [ ] Payroll Direct Deposit: Reimbursement added to paycheck (non-taxable). [ ] Direct Check: Separate check issued by [Employer/TPA]. [ ] Carrier Direct Pay: TPA pays the insurance carrier directly (Aggregate Pay).

EMPLOYER CONFIRMATION

I certify that this Plan Design accurately reflects the benefits I intend to offer my employees.

Authorized Signature: \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ Date: \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Addendum I: The Master Census Template

The success of an ICHRA design relies entirely on data accuracy. Unlike a Group Health composite rate where you only need a generic census, an ICHRA requires specific household data to calculate:

1. Affordability: Using the Lowest Cost Silver Plan (LCSP) based on exact zip code and age.

2. Tax Credits: Determining if the ICHRA offer is "affordable" enough to block APTC.

3. Class Segmentation: Ensuring employees are filtered into the correct benefit tier.

Use the column headers below to build your initial census. Do not guess. Bad data leads to "Unsafe Harbor" exposure.

Census Columns & Data Dictionary

Column Header | Required? | Why We Need It

First Name | Yes | Identification.

Last Name | Yes | Identification.

DoB | Yes | CRITICAL. Rates are age-banded (1:3 curve). We cannot quote without this.

Hire Date | Yes | Determines "New Hire" vs. "Existing" Class status and Waiting Periods.

Gender | Yes | Required for carrier enrollment files.

Relation | Yes | Identify as: Employee, Spouse, Child, or Domestic Partner.

Zip Code | Yes | CRITICAL. Rates are geographically based. Must be the employee's home zip.

County | Yes | Some zip codes span multiple rating areas; county confirms the specific rate.

State | Auto-Fill | Derived from Zip Code.

FIPS Code | Auto-Fill | Derived from Zip/County (Federal Information Processing Standards).

Phone | Yes | For direct enrollment outreach during the shopping phase.

Email | Yes | Primary communication channel for enrollment links and notices.

Job Title | No | Helpful for internal reference, but not used for rating.

Household Income | CRITICAL | Required for Affordability Calculations. If unknown, we must use the W-2 or Rate of Pay Safe Harbor (which is often more expensive for the employer).

Owner % | Yes | Owners >2% (S-Corp) are disqualified from tax-free ICHRA participation.

ICHRA Class | Yes | Assign the employee to their class (e.g., Full-Time, Part-Time, Remote).

COBRA | Yes | Is this individual currently on COBRA? (Y/N)

Retiree | Yes | Is this individual a retiree? (Y/N)

Waive Coverage | No | Does the employee intend to waive? (Helps with participation forecasting).

Smoker | Yes | Tobacco use impacts premiums in many states (up to 50% load).

Last Tobacco Date | Conditional | If Smoker = Yes, date is required for carrier underwriting rules.

Current Premium | Optional | Analysis Tool: What is the total premium for their current plan?

ER Current Contrib. | Optional | Analysis Tool: What is the employer currently paying?

EE Current Contrib. | Optional | Analysis Tool: What is the employee currently paying?

Family ID | CRITICAL | A unique number (e.g., 1001) assigned to the Employee and all their dependents. This links the family unit together for aggregate premium calculations.

No, your current Appendix does not contain a "Waiver of Coverage" form.

While Addendum G covers the Notice of Offer, you are missing the document where the employee formally declines that offer. As mentioned in Module 5, this is critical for ALEs (Applicable Large Employers) to prove they made the offer if the IRS later audits them.

Here is a drafted Addendum J that you can add to your Appendix.

Addendum J: ICHRA Waiver of Coverage Form Example

Instructions for the Employer:

Every eligible employee who declines enrollment in the ICHRA must sign this form. Keep this document in your permanent personnel files for at least 7 years to satisfy IRS Employer Mandate (ACA) proof of offer requirements.

EMPLOYEE WAIVER OF COVERAGE FORM

Plan Year: [202X]

Section 1: Employee Information

  • Employee Name: \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
  • Employee ID: \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
  • Employer Name: [Employer Name]

Section 2: Acknowledgement of Offer

I acknowledge that I have been offered the opportunity to enroll in the Individual Coverage Health Reimbursement Arrangement (ICHRA) sponsored by my employer.

I understand that:

1. The ICHRA would have provided funds to reimburse me for individual health insurance premiums.

2. My employer has certified that this offer constitutes "Minimum Essential Coverage" (MEC) and, for specific employees, meets the "Affordability" standards under the Affordable Care Act.

3. The Annual Enrollment Period is the only time I may enroll unless I experience a Qualifying Life Event (marriage, birth, loss of other coverage).

Section 3: Declination of Coverage

I am voluntarily WAIVING (declining) the ICHRA offer for the following reason (Check One):

  • [ ] Spousal Coverage: I am covered under my spouse’s group health plan.
  • [ ] Medicare/TRICARE: I am enrolled in Medicare or TRICARE.
  • [ ] Parental Coverage: I am under 26 and covered by my parent’s plan.
  • [ ] Individual Coverage (Tax Credit): I am purchasing a plan on the Exchange and intend to claim a Premium Tax Credit (Subsidy) because I believe the ICHRA offer is Unaffordable or does not meet Minimum Value.
  • [ ] Other/No Coverage: I am choosing not to maintain health insurance at this time.

Section 4: Important Tax Warning

I understand that by waiving this coverage:

  • If the ICHRA offer was "Affordable" (as defined by the IRS), I will NOT be eligible for a Premium Tax Credit (Subsidy) on the Health Insurance Marketplace.
  • If I claim a subsidy despite having an affordable offer, I may be required to repay those funds to the IRS when I file my taxes.

Section 5: Signature

Employee Signature: \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Date: \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Addendum K: Mini-COBRA States

State | Continuation Law Type | Max Mini-COBRA Duration (Small Employers)

Alabama | Mini-COBRA | Data varies by plan

Alaska | Federal COBRA | N/A (Follows Federal 18/36 months)

Arizona | Mini-COBRA | 18 months

Arkansas | Mini-COBRA | 120 days (~4 months)

California | Mini-COBRA | 36 months total (Cal-COBRA)

Colorado | Mini-COBRA | 18 months

Connecticut | Mini-COBRA | 30 months

Delaware | Mini-COBRA | 9 months

Florida | Mini-COBRA | 18 months

Georgia | Mini-COBRA | 3 months

Hawaii | Federal COBRA | 18 months

Idaho | Federal COBRA | 3 months

Illinois | Mini-COBRA | 12 months (can be longer for age 55+)

Indiana | Federal COBRA | 3 months

Iowa | Mini-COBRA | 9 months

Kansas | Mini-COBRA | 18 months

Kentucky | Mini-COBRA | 9 months

Louisiana | Mini-COBRA | 12 months

Maine | Mini-COBRA | 12 months

Maryland | Mini-COBRA | 18 months

Massachusetts | Mini-COBRA | 12 months

Michigan | Federal COBRA | 9 months

Minnesota | Mini-COBRA | 18 months

Mississippi | Mini-COBRA | 12 months

Missouri | Mini-COBRA | 18 months

Montana | Mini-COBRA | 18 months

Nebraska | Mini-COBRA | 6 months

Nevada | Mini-COBRA | 18 months

New Hampshire | Mini-COBRA | 18 months

New Jersey | Mini-COBRA | 18 months

New Mexico | Mini-COBRA | 6 months

New York | Mini-COBRA | 36 months

North Carolina | Mini-COBRA | 18 months

North Dakota | Mini-COBRA | 39 weeks (longer for divorce)

Ohio | Mini-COBRA | 12 months

Oklahoma | Mini-COBRA | 63 days

Oregon | Mini-COBRA | 9 months

Pennsylvania | Mini-COBRA | 9 months

Rhode Island | Mini-COBRA | 18 months

South Carolina | Mini-COBRA | 6 months

South Dakota | Mini-COBRA | 18 months (varies if employer terminates)

Tennessee | Mini-COBRA | 18 months

Texas | Mini-COBRA | 9 months

Utah | Mini-COBRA | 12 months

Vermont | Mini-COBRA | 18 months

Virginia | Mini-COBRA | 12 months

Washington | Mini-COBRA | 18 months

West Virginia | Mini-COBRA | 18 months

Wisconsin | Mini-COBRA | 18 months

Wyoming | Mini-COBRA | 12 months