ICHRA Guide for Mid-Market Businesses

ICHRA vs. group plans: what mid-market companies need to know

For mid-market organizations, the choice between ICHRA and traditional group health insurance isn’t just about cost. It’s about scalability, risk management, and meeting the diverse needs of a growing workforce.

Why mid-market companies choose ICHRA

Safety and scalability for growing companies

As your organization expands, traditional group plans become increasingly complex and expensive to manage. ICHRA removes the burden of managing underlying health risks from your business plan. You’re no longer exposed to volatile renewal rates or participation requirements that can derail your benefits strategy. Instead, you set a defined budget and employees access the individual healthcare marketplace. This is a model that scales smoothly whether you’re at 50 employees or 500.

Plan choice and personalization for diverse workforces

Mid-market companies typically have more workforce diversity than small businesses: employees across multiple states, varying age demographics, different family situations, and diverse healthcare needs. Traditional group plans force everyone into the same limited options. ICHRA lets each employee choose the plan that works for their specific situation: their preferred doctors, their prescription coverage needs, their budget priorities.

Key advantages: ICHRA vs. group plans

Downsides of ICHRA for mid-market companies

ICHRA isn’t perfect for every situation. Here’s what to consider:

Provider networks: Individual market plans generally have narrower networks (often HMO or EPO) compared to the broader PPO networks common in group plans. However, for mid-market companies with geographically distributed employees, this is often offset by each employee being able to choose a plan with their local providers.

Premium pricing: Individual market plans are typically 10-20% more expensive than group plans on average.² However, this gap narrows or reverses in many situations:

• For companies with geographically dispersed employees

• When factoring in group plan administrative costs and broker fees

• For companies facing high group renewal increases due to claims experience

• When employees can access premium tax credits (for smaller mid-market employers not subject to the mandate)

ICHRA design rules and employee classes

One of ICHRA’s most powerful features for mid-market companies is its flexibility in plan design. ICHRA allows you to create different benefit tiers for different employee populations, particularly valuable for growing organizations with increasingly diverse workforces. Mid-market companies frequently leverage multiple class types to create a mix-and-match approach that reflects their organizational structure and business needs.

Employee classes you can use

ICHRA allows employers to divide employees into eleven different classes, each with its own benefit design. Here are some of the most popular:

Full-time employees: Define as 30 or 40 hours per week (must be at least 30 hours to satisfy the ACA employer mandate).

Part-time employees: Define as less than 30 hours per week.

Seasonal employees: Workers hired on a short-term basis or for a particular season.

Salaried and non-salaried employees: Employees who receive salary versus hourly wages.

Geographic/rating area employees: Employees whose primary work site is in the same rating area. For mid-market companies with multi-state operations, this is one of the most commonly used distinctions.

Combination classes: Combine two or more classes to create additional distinctions based on your specific needs.

ICHRA affordability for mid-market employers

If your company has 50+ full-time equivalent employees, you’re considered an Applicable Large Employer (ALE) under the ACA. This means you’re subject to the employer mandate and must offer affordable coverage to full-time employees or face penalties.

The good news: ICHRA can satisfy the employer mandate when designed to meet affordability requirements.

What makes an ICHRA “affordable”?

An ICHRA is considered affordable if the employee’s cost for the lowest-cost silver plan in their area (after applying the ICHRA reimbursement) is less than 9.96% of their household income (2026 rate)⁵.

Why affordability matters

For smaller mid-market employers (under 50 FTEs), affordability still matters because it affects whether employees can access premium tax credits. An unaffordable ICHRA gives employees the choice to opt out and claim tax credits instead.

Getting affordability right

Most mid-market ALEs structure their ICHRA to be affordable by:

• Setting reimbursement amounts high enough to meet the affordability threshold

• Using age-based reimbursement scaling to ensure older employees (who face higher premiums) receive adequate support

• Working with an ICHRA administrator that provides affordability calculations and guidance

ICHRA requirements: what you need to know

ICHRA has straightforward requirements for both employers and employees.

Employer requirements

Legal plan documents: You must establish formal plan documents including a plan document and summary plan description (SPD) that outline your ICHRA policies, reimbursement amounts, eligible classes, claims processes, and HIPAA procedures.

ERISA compliance: ICHRAs are subject to ERISA requirements, including providing plan documents to employees and maintaining proper records.

ACA reporting: ALEs (50+ FTEs) must file annual ACA reporting (Forms 1094-C and 1095-C) to report the coverage offered to employees. Take Command’s Professional package includes full ALE support and reporting assistance.

COBRA administration: Unless exempt, you must offer COBRA continuation coverage when employees leave or lose eligibility. Take Command handles COBRA administration as part of our service.

Employee requirements

ICHRA administration for mid-market companies

Setting up and administering an ICHRA requires handling legal plan documents (subject to ERISA), COBRA administration (if not exempt), claims substantiation, reimbursement processing, and record-keeping and tax reporting.

Why use an ICHRA administrator?

While self-administration is possible, it’s not recommended for three key reasons:

Employee privacy: Information about employees’ medical expenses and insurance premiums is Protected Health Information (PHI) under HIPAA. Having employees submit receipts directly to employers creates privacy violations.

Record keeping: The IRS requires businesses to keep records for up to 7 years. An administrator keeps all digital records organized, secure, and compliant.

Regulatory changes: Healthcare policy continues to evolve. An experienced administrator stays current on regulation changes.

Administration for mid-market companies

Take Command’s Professional package includes strategic design planning, hands-on onboarding, a dedicated client success manager, full HRIS integration, complete ALE support for ACA compliance and reporting, plan design consulting, and licensed advisors who help employees choose plans and enroll in coverage.

As you grow, scale into the Signature package (500+ employees), which adds on-site enrollment support, dedicated customer experience teams, and branded employee experiences.