An ICHRA is an individual coverage HRA. The business doesn't buy one group plan. It gives workers a set amount, and they use it for their own individual health plans. The rules come from a 2019 final rule by the IRS, the Labor Department and HHS (84 FR 28888). Most of them sit in 45 CFR 146.123. For the main idea first, see small business health insurance in Florida.
Step 1: Choose your employee classes
A class is a group of workers, like full-time, part-time, seasonal, or workers in the same rating area. The rule lists the classes you may use.
Within a class, the ICHRA must be offered on the same terms. Also, you can't give anyone in a class a choice between the ICHRA and a group plan. You may offer a group plan to one class and an ICHRA to another.
Step 2: Set the monthly amounts
You decide how much each class gets. Under the rule, the amount can go up with a worker's age or number of dependents. The oldest workers can get no more than 3 times what the youngest get.
Your offer also affects whether workers can get a tax credit instead. Read ICHRA affordability before you pick amounts.
Step 3: Write the plan document
As general practice, not a rule cited here, many employers put the rules in writing: who is in each class, the amounts, what costs you repay, and how workers ask to be paid. Many employers use a benefits firm or a lawyer for this step. Talk with a tax or legal professional.
Under 29 CFR 2510.3-1(l), the workers' own policies are generally not part of your plan, if certain terms are met. One term is that you don't pick or endorse any insurance company.
Step 4: Send the notice at least 90 days ahead
Under 45 CFR 146.123(c)(6), the ICHRA must give each worker a written notice at least 90 calendar days before the plan year starts. Workers who join later get it no later than the day the ICHRA can start for them.
The notice explains the amount, how it may affect a tax credit, and the worker's right to opt out once each plan year.
Step 5: Workers enroll in their own plans
Each worker, and any family members in the ICHRA, must have individual health coverage. Getting a new ICHRA opens a special enrollment period on the Marketplace under 45 CFR 155.420(d)(14). Workers can also buy plans outside the Marketplace.
Step 6: Check coverage, then pay back premiums
Before paying anything, the ICHRA must check that each person has individual coverage. The rule allows proof like a document from the insurance company, or a worker's statement. Then, with each new request, it must check again that coverage is still in place.
Step 7: Keep good records
As general practice, not a rule cited here, keep copies of notices, coverage proof, and each payment. Ask a tax or legal professional how long to keep them.
To weigh the trade-offs, read ICHRA pros and cons. For a smaller-employer option, see ICHRA vs QSEHRA.