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ICHRA & benefits design

Alex's boss just cost him $2,160 a year — by trying to help

When an ICHRA offer displaces subsidies worth more.

Alex makes $32,000 a year.

At that income, he qualifies for $580/month in ACA subsidies — government support that covers most of his premium through the marketplace.

A single full bar showing the $580 a month Alex receives in ACA subsidies at an income of $32,000 a year.

Alex earns $32,000 a year

Alex’s ACA subsidy $580/mo

from the government, through the marketplace

Illustrative. What Alex gets today, before any employer offer.

Alex’s boss offers ICHRA: $400 a month.

A generous contribution. But there’s something the boss doesn’t realize.

Two bars compared: the $580 monthly ACA subsidy Alex already has, and the smaller $400 monthly ICHRA contribution his boss is offering.

Alex’s ACA subsidy $580/mo

from the government

Boss’s ICHRA offer $400/mo

well-intentioned

Illustrative. Two sources of support, side by side.

The $580 subsidy disappears.

The government considers an affordable ICHRA offer to be employer-sponsored coverage. That disqualifies Alex from marketplace subsidies.

The subsidy bar has emptied to zero and is marked disqualified, while the $400 ICHRA bar remains and is labelled as having replaced it.

Alex’s ACA subsidy $0 of $580

disqualified — the ICHRA offer counts as employer coverage

Boss’s ICHRA offer $400/mo

replaced the subsidy rather than adding to it

Illustrative. The offer does not stack on the subsidy — it replaces it.

Alex lost $180 a month — $2,160 a year.

“Affordable” means the employee’s required share doesn’t exceed about 9% of household income. If the ICHRA offer passes that threshold, subsidies are gone — even if the subsidy was worth more.

A tally of Alex’s monthly support before and after the offer — $580 becomes $400, a shortfall of $180 a month — followed by the annual total of $2,160.

Alex’s monthly support

Before: ACA subsidy
$580/mo
After: boss’s ICHRA
$400/mo
Shortfall
−$180/mo

$2,160 less support per year

Illustrative. The gap between the subsidy Alex had and the offer that replaced it.

There’s a way to avoid this.

ICHRA lets you define which employee classes receive the offer. For employees who qualify for large subsidies, excluding them preserves their government benefit. Sometimes not offering is the most generous option.

A three-stage sequence: define employee classes, leave the subsidy-eligible class out of the ICHRA offer, and Alex keeps his $580 a month.

  1. Define classes who the offer covers
  2. Exclude Alex’s class no ICHRA offer made
  3. Subsidy preserved $580/mo kept
Illustrative. Leaving a class out of the offer keeps their subsidy intact.