Federal regulations require employers to define employee classes when offering an ICHRA. Each class must be treated consistently:
- The same class cannot be offered a choice between an ICHRA and a group health plan.
- Allowance amounts must be uniform within a class (with limited rating flexibility).
See: Employee Job Classes Under ERISA for definitions commonly used across benefit regulations.
How Classing Works in Practice
Employers may:
- Offer a group plan to one class, and
- Offer an ICHRA to another
…but may not allow employees in the same class to choose between the two. Or, employers can simply offer an ICHRA to all employees with no other health plan options.
Minimum Class Size Rule
If an employer offers both:
- a group health plan to some classes, and
- an ICHRA to other classes,
Then certain ICHRA-eligible classes must meet federally defined minimum size requirements. These thresholds vary based on the employer’s total workforce size and are designed to prevent employers from selectively steering small, potentially high-risk groups into the individual insurance market.
-
Fewer than 100 employees:
The ICHRA class must include at least 10 employees. -
100–200 employees:
The ICHRA class must include at least 10% of the employer’s total workforce. -
More than 200 employees:
The ICHRA class must include at least 20 employees.
The minimum class size rule applies only when an employer offers a group health plan to some classes and an ICHRA to others. Minimum class size requirements generally do not apply when the employer offers an ICHRA to all employees, or the employer does not offer a traditional group health plan at all.
Important Scope Limitation
These minimum class size rules apply only to ICHRAs. They are a specific regulatory requirement created under the ICHRA regulations and do not apply generally to employee classification decisions under ERISA. For example, when an employer sponsors a traditional group health plan, ERISA generally allows employers to establish different employee classes without regard to minimum class size thresholds. Those traditional ERISA-based classification rules are separate and distinct from the ICHRA minimum size requirements.
Uniformity Requirement
Once an employee is grouped into a class:
- The same allowance rules must apply to every employee in that class.
- Employers may vary allowances by class, not by individual.