ICHRA affordability calculator for 2026 and 2027

Find the smallest affordable allowance

I built this because almost every ICHRA conversation I have with a founder starts with the same question: how much do we have to give people? The answer is set by one number per employee, the cost of the cheapest silver plan where they work, and the calculator turns that into the minimum allowance. Run it for your oldest employee in each class, because silver premiums rise with age.

How the ICHRA affordability test works

With a group plan, affordability looks at what the employee pays for your cheapest plan. With an ICHRA there is no plan you offer, so the test uses a stand-in: the lowest-cost silver plan (LCSP) for self-only coverage on the exchange. The employee's "required contribution" is the LCSP premium minus the monthly allowance you give them for self-only coverage.

If that required contribution is at or below the affordability percentage of income (9.96% in 2026, 10.22% in 2027), the ICHRA is affordable. For an applicable large employer, an affordable ICHRA that also counts as minimum value protects you from the section 4980H(b) penalty. For any size employer, it decides whether employees can drop the ICHRA and take a premium tax credit instead.

Family members don't change the employer test. You can offer larger allowances for families, but only the self-only amount and the self-only silver premium count toward affordability.

Safe harbors that make the test practical

You don't know an employee's household income, and the exchange prices plans by ZIP code and age. The IRS gives ICHRA employers three simplifications so the test can be run before the plan year:

• Location safe harbor. Use the LCSP at the employee's primary site of employment instead of where they live. Remote employees work from home, so their home ZIP is the site.
• Look-back month. Use the silver premiums for January of the prior calendar year when your plan year starts in a calendar year. This lets you set 2027 allowances using premiums that are already published.
• Income safe harbors. The same federal poverty line, rate of pay and W-2 safe harbors used for group coverage. The calculator applies all three.

The FPL safe harbor is the strictest and simplest: in 2027 an employee can be asked to pay at most $135.92 a month in the contiguous states and DC. If your allowance covers the silver premium minus $135.92 for everyone, you never need payroll data to prove affordability.

Worked examples

Rules that trip employers up

• Same terms within a class. Allowances must be the same for everyone in a class (for example full-time, part-time, salaried, hourly, or by rating area), except that they can rise with age and family size.
• No choosing between ICHRA and group in one class. You can't offer the same class both a traditional group plan and an ICHRA.
• Opt-out. Employees must be able to opt out of the ICHRA each year, and anyone who opts out of an unaffordable ICHRA can claim premium tax credits.
• Notice. Send each eligible employee a written notice at least 90 days before the plan year starts.
• Coverage verification. Employees must have individual health insurance (or Medicare) to be reimbursed, and the administrator must verify it.

How I'd set allowances for a real team

The calculator answers the compliance question for one person. Designing allowances for a whole company is a slightly different exercise, and it's the one I walk founders through most often. The goal is an allowance that is affordable for everyone, buys a plan people actually want, and keeps the company's monthly spend predictable.

1. List every employee's age and work ZIP code Silver premiums are set by age and rating area, so these two facts drive almost everything. Remote employees use their home ZIP. Group people by state or rating area if you have more than a handful of locations.
2. Look up the lowest-cost silver premium for each person Use HealthCare.gov's plan preview or your state exchange, for self-only coverage at each age. Under the look-back rule you can use the prior January's premiums for a calendar-year plan.
3. Pick a safe harbor FPL is simplest because it needs no pay data, but it demands the largest allowance. Rate of pay lets well-paid teams pass with smaller allowances. Most venture-backed companies I talk to can pass under rate of pay with room to spare.
4. Find the worst case in each class The oldest employee in a high-cost area usually sets the floor. If one person forces a large allowance for everyone, age-banded allowances (up to 3:1) solve it without overpaying younger employees.
5. Decide how generous to be above the minimum Affordable only means the employee pays no more than about a tenth of pay for the cheapest silver plan. Many companies give enough to cover a mid-priced silver or gold plan so the benefit feels like real coverage, not a discount.
6. Add dependents if you want to Family allowances don't affect affordability, but they decide whether parents can afford to cover their kids. A common pattern is a set amount per employee plus a smaller amount per dependent.

Two practical notes. First, individual premiums can change a lot from one year to the next (many states saw double-digit increases for 2026), so rerun this every fall before your 90-day notice goes out. Second, the employee's actual plan choice doesn't matter for the test: if they pick a more expensive gold plan, they pay the difference, and the ICHRA is still affordable.

Running your ICHRA with Prescience Choice

Once you know your allowance, someone has to show employees the plans available to them, help them enroll, verify coverage and track reimbursements. That's what Prescience Choice does, and it's priced below the platforms most founders compare us to.

If your team is about 15 people or more in a few states, compare a group plan too. A group plan with an effective $0 deductible can cost less per person than allowances large enough to buy good individual coverage for older employees. Our savings calculator compares both.