ICHRA (now the CHOICE Arrangement): how it works for Texas and Oklahoma employers in 2027.

How an ICHRA works.

1. You set an allowance for each class of employee, for example $500 a month for full-time staff.
2. Employees buy an individual plan on HealthCare.gov or directly from an insurer. They must be enrolled in individual coverage (or Medicare) to use it.
3. They submit proof of premium payments, or you pay the insurer directly, and you reimburse up to the allowance.
4. Reimbursements are tax-free to the employee and deductible for the business.

The rules come from a 2019 federal regulation that took effect for plan years starting in 2020. HealthCare.gov now labels it the CHOICE Arrangement (formerly ICHRA); the mechanics are the same.

Classes and amounts.

You can offer different allowances, or offer an ICHRA to some classes and a group plan to others, based on categories the rule allows:

• Full-time and part-time employees
• Salaried and hourly employees
• Seasonal and temporary employees
• Employees in different rating areas (for example Austin and Oklahoma City)
• Employees in a waiting period, under a collective bargaining agreement, or under 25
• Non-resident aliens with no U.S. income

Within a class the terms must be the same, except that you can raise the amount with age (up to 3 times as much for the oldest employee as the youngest) and with family size. You cannot offer both a group plan and an ICHRA to the same class. If you split some classes between group and ICHRA, minimum class sizes apply: 10 employees if you have fewer than 100.

Affordability in 2027, and why it matters to employees.

An ICHRA is affordable for 2027 if the employee's monthly cost for the lowest cost silver self-only plan in their area, minus the monthly allowance, is no more than 10.22% of their household income divided by 12.

For lower-paid employees, a small ICHRA can leave them worse off than the tax credit they would get otherwise. We model the affordability for each class before you set amounts.

Deadlines and paperwork.

• Written notice to eligible employees at least 90 days before the plan year starts (new hires: by the day they become eligible).
• Annual opt-out: employees must be allowed to waive it each year.
• Special Enrollment Period: employees newly offered an ICHRA get a window to buy individual coverage, so a mid-year start is possible.
• Plan documents and substantiation: usually handled by an ICHRA administrator, which we help you choose.

Employers with 50 or more full-time equivalent employees can use an affordable ICHRA to meet the employer mandate. Use the IRS affordability safe harbors.

Is an ICHRA right for your business?

It tends to fit when you want a fixed budget, your team is spread across cities or states, you cannot meet group participation minimums, or employees value choosing their own doctors. A group plan can fit better when your team is older and concentrated in one place, or when you want one shared network. See ICHRA vs QSEHRA and small business health insurance.

Questions people ask.

Sources.

1. HealthCare.gov, CHOICE Arrangement (formerly ICHRA) for employers. healthcare.gov
2. Final rule, Health Reimbursement Arrangements and Other Account-Based Group Health Plans, 84 FR 28888 (June 20, 2019). federalregister.gov
3. IRS Rev. Proc. 2026-26 (2027 required contribution percentage, 10.22%). irs.gov
4. IRS, Employer shared responsibility provisions. irs.gov

General information for Texas and Oklahoma residents, not tax or legal advice. Rules and numbers can change; this page is reviewed on the date shown above. Your eligibility and prices are set by HealthCare.gov or the insurer when you apply.