Employers across the country—from small businesses to municipalities—often manage a wide range of employee types: full-time staff, part-time employees, seasonal workers, and even elected officials. This workforce diversity creates unique challenges when designing equitable and cost-effective healthcare benefits.
As states explore how to better support employers in offering flexible, affordable coverage, Individual Coverage Health Reimbursement Arrangements (ICHRAs) stand out as a modern solution. One of the most powerful aspects of ICHRAs is the ability to customize benefits based on distinct employee classes—ensuring each group receives tailored support while helping employers manage costs.
What Are ICHRA Employee Classes?
Under ICHRA regulations, employers can divide employees into 11 defined classes and offer different healthcare reimbursements to each. This segmentation enables strategic benefit design while remaining compliant with the Affordable Care Act (ACA).
According to PeopleKeep’s 2024 Guide, the eligible ICHRA classes include:
- Full-time employees
- Part-time employees
- Seasonal employees
- Employees covered by a collective bargaining agreement
- Employees in a waiting period
- Non-resident aliens with no U.S.-based income
- Salaried employees
- Non-salaried (hourly) employees
- Temporary employees of a staffing firm
- Employees working in the same geographic location
- A combination of two or more of the above
This class structure allows employers, regardless of size or industry, to offer personalized, scalable health benefits that align with operational and workforce needs.
Why This Matters for States and Employers Flexibility to Meet Workforce Needs
Flexibility to Meet Workforce Needs
Whether it’s a business employing part-time seasonal staff or a municipality supporting both union and non-union employees, ICHRAs allow for benefits to be tailored by employee class. This flexibility helps employers serve diverse workforce segments—something traditional group plans struggle to do.
Cost Control and Predictability
By classifying employees, employers can define reimbursement budgets based on factors such as job status, hours worked, or geographic cost of living. This ability to set clear contribution levels supports financial planning and long-term sustainability—especially for employers with variable staffing needs.
Improved Employee Satisfaction and Choice
ICHRA participants use pre-tax employer dollars to shop for their own individual health plans. This empowers employees to choose coverage that meets their personal and family needs—whether they’re part-time city council members, full-time warehouse workers, or salaried nonprofit directors. Explore Venteur’s Top 8 ICHRA Employee Benefits.
Compliance Considerations
While ICHRAs offer tremendous flexibility, employers and states supporting them through an SBE must stay aligned with key compliance rules:
- Ensure Fair and Legal Class Designation: Employee classes must be clearly defined and applied consistently to avoid risk of discrimination or adverse selection.
- Meet ACA Affordability Rules: For full-time employees, ICHRA contributions must meet affordability thresholds per IRS guidance on ICHRAs.
- Document and Communicate Policies Clearly: Employers must provide clear documentation and timely employee notices explaining how the ICHRA works, what’s reimbursable, and how to access coverage.
A Scalable Solution for States
By promoting ICHRA adoption, states can empower a broader set of employers to offer affordable, flexible health coverage. Encouraging the use of employee classes gives employers a compliant framework to customize benefits while simplifying administration.
With ICHRA enrollment projected to grow by nearly 30% in 2024, this model presents a scalable opportunity for states to expand access and improve the employer-sponsored insurance landscape.
Final Thoughts
ICHRAs offer a modern way for employers across sectors to provide personalized, ACA-compliant health benefits. By embracing employee class flexibility, states can enable their platforms to better serve the evolving needs of today’s workforce. From seasonal parks workers to salaried nonprofit leaders, ICHRAs help ensure every employee has access to coverage that works for them while keeping costs predictable and participation simple for employers.
