The Power of Classes
The true strategic power of an ICHRA lies in its flexibility through federally permitted employee classes. Instead of a one-size-fits-all approach, employers can segment their workforce and assign different contribution amounts based on fair, objective criteria. The most commonly used classes include:
Full-Time Employees
Part-Time Employees
Salaried Employees
Hourly Employees
Geographic Rating Area
+ 6 More Federal Classes
Seasonal workers, temporary staff, unionized employees, foreign workers, employees in a waiting period, and new hires.
Age and Family Size Variations
In addition to base class distinctions, employers can also vary contribution amounts based on family size and age within a given class. Because individual health insurance premiums naturally increase as a person gets older (known as age-banding), a flat-dollar contribution might cover 100% of a 25-year-old's premium but only 30% of a 60-year-old's premium.
To solve this, employers can scale their allowances based on age. For example:
| Age Band | Monthly Allowance Example |
|---|---|
| Under 30 | $200/month |
| 30–50 | $400/month |
| Over 50 | $600/month |
The Company Census
Ensure your census includes the following for every employee:
- Zip Code and County
- Date of Birth
- Employment Class (based on their specific pay structure or status)
- Employee Income Data (or Safe Harbor estimates)
You cannot quote accurately without knowing the specific rating area of every employee, and you cannot run accurate ACA Affordability Stress Tests without baseline income and class structure.
Class Strategy & Contribution Benchmarking
🎯 Benchmark Strategy
Benchmark your base contribution to the Lowest Cost Silver Plan (LCSP) or Second Lowest Cost Silver Plan (SLCSP) in the local market. This ensures the allowance is usable and provides a solid foundation for passing ACA Affordability tests.
🗺️ Geographic Equalization
Use Geographic Rating Area classes to equalize buying power. A $300 allowance might cover a full premium in Texas but only half the premium in New York. Adjust class contributions so employees in different states experience the same out-of-pocket impact.
👔 Management Carve-Outs
Utilize "Salaried" vs. "Hourly" classes to create executive-level benefit tiers. This allows rich, recruiting-focused allowances to leadership without inflating the entire hourly workforce budget.
Structuring Your Fees
1. TPA/Quoting Fee
Vendor pricing varies widely depending on quoting, compliance, enrollment support, billing, and reimbursement features.
2. Agent Consulting Fee
An optional fee set at the agent's discretion, typically wrapped into the TPA/Quoting fee making it invisible to the client.
3. Implementation & Renewal Fees
A one-time setup fee for initial document generation and employee onboarding, plus an annual renewal fee for compliance updates, new affordability testing, and open enrollment support.