what they are and how they work

With the Individual Coverage HRA, employers can reimburse employees tax-free for individual health insurance and medical expenses. Among the hallmark characteristics of the Individual Coverage HRA may be the freedom from the ICHRA classes, which enable employers to achieve the flexibility they have to design a benefit within budget while retaining and recruiting quality employees. But what are the ICHRA classes and how will they work? Let's walk-through it.

How the ICHRA classes work

To help employers prioritize their health benefits budget, employee classes separate employees into groups by legitimate job-based criteria like hours worked or location.
The nice aspect of ICHRA is you can combine it with a conventional group health plan.
Employers offer one type of employees an organization health plan and another type of employees an ICHRA.
The only caveat is the fact that employers cannot offer employees in the same class (say full-time employees) the choice from a traditional group health plan or ICHRA.
Each class needs to have only one benefit offering.

The 11 ICHRA classes

Full-time
Probably self-explanatory, but your business can define whether what this means is 30 hours or 40 hours a week, but remember that to fulfill the employer mandate, it'll need to be at least 30 hours a week.

Part-time
Depending around the employer’s needs, this can be understood to be either under 30 or under 40 hours a week.

Seasonal
Employees who're hired on a short-term basis or a specific season.

CBA Class
This includes employees who are part of a Collective Bargaining Agreement which signifies an itemized agreement between a company, employee, and their trade union based on employment, level of salary, working hours, along with other working conditions.

Waiting Period Class
Employees that simply joined an employer. This is standard practice when new employees come on board. Businesses can choose as much as 90 days before a worker's health benefits kick in.

Rating Area Class
This class could be broken up by employees located in different geographic locations. It is generally regarded as employees whose primary site of employment is in the same rating area.

Non-Resident Alien Class
Employees who are non-resident aliens without any US-based income, including foreign employees who work abroad.

Salaried
Employees who get a salary as wages.

Non-Salaried
Employees, for example hourly workers, who don't get a salary as wages.

Staffing Firm
Employees placed for temporary assignments. ICHRA is a game-changer with this category, because now employers can choose the budget that actually works perfect for them and reimburse temporary employees that amount every month. It keeps the employer free from skyrocketing group plan costs and permits the employee faster access to the healthcare coverage they need!

Combination Classes
Employers can combine several of the aforementioned classes to create a new class based on their demands. Each class can further be divided by age and family size.

That means the possibilities are endless!

One more thing to note about ICHRA classes

Employers who intend to offer a traditional group health intend to a minumum of one type of employees and an ICHRA to another type of employees will have to bear in mind the minimum class size requirements. These requirements were put in place to prevent the person market from being saturated with high risk individuals.

Minimum class size requirements apply to the following classes:

Salaried Employees
Non-Salaried Employees
Full-time Employees
Part-time Employees
Employees in the same geographic rating area

The minimum number of employees to become included in a class ultimately depends upon the size of the business based from the employee count on the very first day of the plan year.

A hardly any other ICHRA class size notes:

Combo Classes: Minimum class size applies to any combo-classes that include one of the classes in the above list unless it's a combo using the waiting-period class, whereby there is no restriction
Rating Area Classes: Minimum class sizes only affect rating areas small compared to a state. For instance, should you or your client has one employee inside a remote state, you could have a category of 1 without violating the guidelines. However, if you are utilizing a narrower rating area design (typically in the “county” level) then minimum class sizes apply.

Important Reminder: Minimum class sizes only apply when a minumum of one class is being offered a traditional group plan. If an employer is offering multiple ICHRAs to different classes, there are no minimum class size restrictions.