Health benefits for Tennessee employers with fewer than 50 employees

The problem many small employers see

A group plan is a real commitment. For lower-wage employees, though, it can still mean a monthly premium share plus a deductible that's hard to cover.

In this guide, "lower-wage employees" is a working term, not a legal category: roughly, workers earning under about $50,000 a year, though what actually decides tax-credit help is household income compared with the federal poverty level (FPL). For 2027 coverage, 100% to 250% of FPL, the range where silver plans add cost-sharing reductions, is $15,960 to $39,900 for one person and $33,000 to $82,500 for a family of four (HHS 2026 poverty guidelines); above that, premium tax credits shrink as income rises, and employers still can't set ICHRA classes by wage; they must use classes the federal rules allow, such as full-time vs. part-time, salaried vs. non-salaried (such as hourly), seasonal workers, employees whose primary worksite is in different rating areas, or employees under a collective bargaining agreement (see the permitted-classes rules).

National averages (KFF 2025 Employer Health Benefits Survey):

There's also a tax-credit catch. If you offer coverage that counts as affordable, an employee can't get a premium tax credit on the Marketplace, even if they decline your plan.

How an ICHRA works

An Individual Coverage HRA lets you give employees a set monthly allowance instead of picking one plan for everyone. Employees buy their own individual health insurance, and you reimburse premiums tax-free, up to the allowance. There's no federal minimum or maximum allowance. Employees get written notice at least 90 days before the plan year and can decline. Short-term plans don't qualify.

The federal government now also calls an ICHRA a "CHOICE Arrangement." It's the same benefit under a new name.

Allowance or tax credit, not both

An employee offered an ICHRA can't use the allowance and a premium tax credit at the same time.

• If the ICHRA is affordable for that employee, they can't get a premium tax credit, even if they decline the ICHRA.
• If it isn't affordable, the employee chooses: take the allowance, or opt out and apply for a premium tax credit instead.

An ICHRA is affordable if the lowest-cost self-only silver plan where the employee lives, minus your monthly self-only allowance, costs no more than 9.96% of one-twelfth of household income for 2026 plan years, or 10.22% for 2027 plan years. The test uses self-only amounts even when family members are covered, and the Marketplace makes the official determination from the HRA details the employee enters.

Documentation matters. An employee who opts out of an unaffordable ICHRA to claim a premium tax credit must report the details from your written ICHRA notice on the Marketplace application, may be asked for a copy of that notice to confirm a Special Enrollment Period, and should keep it, along with a record of the opt-out, for their tax return. The free guide (PDF) includes an illustrative worksheet and opt-out record in Appendix A.

Who can get what: permitted employee classes

You can offer different allowances to different classes of employees, but only to the classes federal rules allow. You can't create a class based on pay level. Permitted classes include:

• full-time, part-time and seasonal employees
• salaried and non-salaried (for example, hourly) employees
• employees under a collective bargaining agreement
• employees still in a waiting period
• employees in different work locations (by insurance rating area)
• non-resident aliens with no U.S. income, certain staffing-firm employees, and combinations of these

Same terms. Within a class, everyone is offered the same terms. The allowance can rise with age (up to 3 to 1 from oldest to youngest) and with the number of dependents.

No mixing within a class. You can't let one class choose between your group plan and an ICHRA. If you offer a group plan to some classes and an ICHRA to others, certain classes need a minimum size (at least 10 employees for employers with fewer than 100). If you offer no group plan, the minimums don't apply.

What this means for your team

For many lower-wage employees, a premium tax credit plus cost-sharing reductions may be worth more than the allowance a small business can afford. For higher-paid employees, a tax-free allowance may be worth more. The design question is who comes out ahead under which option, using permitted classes only. That has to be checked employee by employee with real premiums, not assumed.

Employers with fewer than 50 full-time-equivalent employees aren't required by federal law to offer coverage. Employees under 100% of the poverty level generally can't get premium tax credits, and Tennessee hasn't expanded Medicaid, so those employees need extra care.

How Chuck helps

1. Free Employee Benefits & Tax Credit Review. Compare your current benefits with ICHRA and QSEHRA options using your employees' general situations (not tax advice).
2. Benefits concierge for employees. One-on-one help checking doctors and prescriptions. Chuck helps with HealthCare.gov applications only after the employee reviews the application and gives documented consent.
3. Administration. As part of the consultation, Chuck connects employers with an ICHRA administration partner that handles plan documents, employee notices, verifying coverage and processing reimbursements.
4. Income updates. Employees learn why to report income changes. Starting with 2026 coverage, any excess advance tax credit has to be repaid in full.

Written for Tennessee employers with fewer than 50 full-time-equivalent employees. Larger employers face additional federal employer-mandate rules not covered here. General information, not legal or tax advice; check with your tax professional or benefits attorney.

Read more

ICHRA, QSEHRA and tax credits: a guide for Tennessee small businesses · Self-employed coverage · How premium tax credits work