The ICHRA model allows employees to be split into different “classes”, each of which can then be assigned its own type of reimbursement. Classes are essentially a way of allocating different benefit levels to different groups of employees. There are 10 class types that employees can be divided into:
- full-time employees
- part-time employees
- salaried employees
- non-salaried employees
- employees in a specific geographic area
- seasonal employees
- emporary employees from a staffing firm
- new employees who have not yet completed the waiting period for coverage
- employees who are part of a Collective Bargaining Agreement (CBA)
- non-resident aliens with no US income, such as foreign employees working abroad
From these types, an employer can create as many classes as they need. Class types can also be combined. For example, you could have a class that encompasses all full-time employees within a given state. Lots of mixing and matching is possible!
One of the great things about classes is that one class can be offered an ICHRA while another is offered a traditional group health plan, though there are some special requirements brought on by this situation that will be discussed in the following section. There are many situations where this kind of arrangement could be useful. For example, if your organization is spread across multiple states, you could offer employees in one state a traditional group plan while employees in another state are offered an ICHRA, saving you the trouble of finding a single group plan that will work for both areas. A similar split could be used for employers who are having difficulty meeting participation requirements due to a lack of participation from part-time employees, offering the group plan to full-timers and an ICHRA to part-timers. The ICHRA itself will not have participation requirements, and because the part-time employees are now being offered an ICHRA instead of the group health plan, their lack of participation will no longer count against the group plan.
- Rules Regarding Classes
Most of the rules and regulations surrounding ICHRA are designed to prevent discrimination and ensure that things are offered fairly to each class of employees. Classes cannot be used to unreasonably favor certain employees over others, nor can they be used as a “risk dump” for one’s existing group health plan. Each class must be based on a legitimate metric related to their employment, such as hours worked or their geographic location. Classes cannot be created for employees with certain health conditions and other non-job-related factors.
Those who want to offer an ICHRA alongside a traditional group health plan will need to keep in mind some additional requirements. First, each class can only be offered one of the two options – the group health plan or the ICHRA – and not both. Second, this arrangement comes with restrictions on how small certain classes can be. This applies to classes for salaried and non-salaried employees, full- and part-time employees, classes that encompass a geographic area smaller than a state (ex: a certain city or county), and any classes that combine one or more of these class types, unless combined with the waiting period class. Minimum class size will vary depending on the total number of employees. For example, an employer with fewer than 100 employees may have a minimum of 10 per class, while an organization with 200 or more employees would have a minimum of 20.
Of course, employers cannot be certain how many employees will or will not participate, so compliance with these minimums is based on a “reasonable estimate” made at the beginning of the plan year. When designing your plan, be sure to document this estimate to show how you will meet these minimums. If actual participation rates do not align with the minimums by the end of the year, changes will need to be made going forward.