ICHRA for South Carolina Small Business Owners: 2027 Primer

An individual coverage health reimbursement arrangement (ICHRA) is an employer benefit. You choose a dollar amount for each employee. Each employee buys an individual health plan, and you reimburse premiums and other qualified medical costs up to that amount. The reimbursements are not taxed to the employee. HealthCare.gov now calls these CHOICE Arrangements, formerly known as ICHRAs. The rules below are the same under either name.

For a South Carolina small business, the appeal is a fixed budget. You are not tied to a group plan's renewal, and there is no minimum number of employees who must take part. The trade-off sits with your staff. An ICHRA can change whether they qualify for the Marketplace tax credit, so the amount you offer needs to be checked against 2027 plan prices in the counties where they live.

HealthCare.gov describes the steps this way:

1. You set the amount. You choose what to offer for each 12-month plan year. There is no minimum or maximum.
2. You decide who gets it. You can offer it to all eligible employees or only to certain classes, such as full-time, part-time, seasonal, salaried, hourly, or employees at one work location. You cannot make up your own classes.
3. Employees buy their own coverage. It must be individual health insurance, such as a Marketplace plan, a plan bought directly from an insurance company, or Medicare Parts A and B or Part C. Short-term plans and dental-only or vision-only coverage do not qualify.
4. You reimburse them. You need a reasonable way to confirm each employee is enrolled before you pay.

Inside a class, everyone gets the same terms. Two differences are allowed: you can give more to older employees, up to three times what the youngest receive, and more to employees with more dependents.

You cannot give the same employees a choice between a group plan and an ICHRA. If you keep a group plan for some classes and use an ICHRA for others, minimum class sizes apply. For an employer with fewer than 100 employees, the minimum is 10.

Employers of any size can generally offer an ICHRA if they have at least one employee who is not a self-employed owner or the spouse of a self-employed owner. HealthCare.gov is direct on this point: these arrangements are for employees, not self-employed individuals.

Whether you, as the owner, count as an employee depends on how your business is set up for taxes. Ask your CPA before you plan on reimbursing yourself. If you work alone with no employees, our self-employed health insurance guide is the better starting point.

It can. This is the part to get right before you announce anything.

Many South Carolina workers at small businesses buy Marketplace plans today and get a premium tax credit. An ICHRA offer changes that:

• If your offer is "affordable," the employee and their household members cannot get the premium tax credit, even if the employee never uses your reimbursement.
• If your offer is not affordable, the employee can choose your reimbursement or the tax credit, but not both. To take the credit, they have to opt out of the ICHRA.

Employees must be allowed to opt out each year before the plan year starts.

How the 2027 affordability test works

The test looks at one plan: the lowest-priced silver plan for one person in the employee's area. Subtract your monthly reimbursement from that plan's premium. For plan years starting in 2027, your offer is affordable if what is left is less than 10.22% of one-twelfth of the employee's yearly household income.

That means the test depends on local prices. Here are the lowest-priced 2027 silver plans in several counties:

An example. Say you offer $400 a month to a 40-year-old employee in Richland County. The lowest-priced silver plan is $682, so $282 is left for the employee to pay.

• With a household income of $45,000, the limit is about $383 a month (10.22% of $3,750). $282 is under the limit, so the offer is affordable and the employee cannot get a tax credit.
• With a household income of $30,000, the limit is about $256 a month (10.22% of $2,500). $282 is over the limit, so the offer is not affordable. The employee can opt out and apply for a tax credit.

The same $400 gives two different results in one office. An offer that counts as affordable can still be smaller than the tax credit an employee gets today, so run the numbers for each person before you set amounts. Our guide to who qualifies for an ACA subsidy explains the credit your employees may be getting now, and the 2027 rate changes by county show how much local prices moved.

An ICHRA is one option. A traditional group plan is another, and for some employers it fits better.

Most insurance companies will write group coverage for as few as one or two eligible full-time employees. If your team wants one shared plan and network, look at our small business health insurance and group health insurance pages. Our ICHRA pros and cons guide covers when each one fits.

• Written notice. You must give current employees written notice 90 days before each plan year begins. New employees get it as soon as they become eligible. The federal government publishes a sample notice.
• Start date. You can start an ICHRA at any time. A January 1 start lines up with Marketplace open enrollment, which runs November 1 through January 15, and with the date most deductibles reset.
• Starting mid-year. Employees who are newly offered an ICHRA may qualify for a Special Enrollment Period, so they can buy an individual plan outside open enrollment. HealthCare.gov says these employees enroll through the Marketplace Call Center, not online.

Our ICHRA page explains how we set one up.

Tell us how many employees you have, where they live and what you want to spend. We will price an ICHRA budget and a group plan for 2027 so you can see both.