ICHRA exists inside the ACA's framework, not outside it. Understanding how the two interact matters for both compliance and for what your employees can expect.
For Applicable Large Employers (generally 50+ full-time-equivalent employees), the ACA's employer shared responsibility provisions require an offer of affordable, minimum-value coverage to full-time employees or the employer risks a penalty. An ICHRA offer counts as an offer of minimum essential coverage — as long as it meets the ACA's affordability test.
Affordability is measured against the employee's required contribution toward the lowest-cost silver plan available to them, after applying the ICHRA amount, as a percentage of income. Because employers don't always know an employee's actual income, the IRS provides safe harbor methods — based on Form W-2 wages, rate of pay, or the federal poverty line — that employers can use instead to determine affordability with more certainty.
This is one of the most misunderstood parts of ICHRA. If an employer's ICHRA offer is affordable, the employee generally cannot also claim marketplace premium tax credits — they use the ICHRA instead. If the offer is unaffordable, the employee can opt out of the ICHRA and pursue subsidized marketplace coverage instead. Employees need to make an active decision, and the required notice must give them the information to do so.
ICHRA depends on employees having a functioning individual marketplace to shop in — which is part of why it wasn't created until 2019. In the ACA's earlier years, individual market plans in many areas were less stable and less standardized. As ACA marketplace plans matured and premium tax credit structures stabilized coverage options, regulators judged the individual market ready to support employer-funded reimbursement at scale.
It can — for Applicable Large Employers, an ICHRA offer counts as an offer of minimum essential coverage, provided it meets ACA affordability requirements calculated under one of the IRS safe harbor methods.
Not both fully. If an employer's ICHRA offer is deemed affordable, the employee generally isn't eligible for marketplace premium tax credits. If the offer is unaffordable, the employee can decline the ICHRA and may qualify for subsidies instead.
Affordability is generally based on whether the employee's required contribution toward the lowest-cost silver plan in their area, net of the ICHRA amount, stays under a percentage-of-income threshold set annually by the IRS — calculated using one of several permitted safe harbor methods.