Scale an ICHRA allowance by age
The base amount in this class.
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The calculator multiplies your base allowance by the ratio between each age's factor and your youngest employee's factor, then caps the result at three times the base. A handful of states and DC use their own age curves; the federal default is a good approximation everywhere else.
Individual health insurance costs more as people get older: under the federal default age curve, a 64-year-old's premium is three times a 21-year-old's. An ICHRA lets you raise allowances with age to match, as long as the oldest employees in a class get no more than three times what the youngest get. Enter the allowance for your youngest employee, and this calculator scales it along the same curve insurers use.
- Age 21 factor
- 1.000
- Age 40 factor
- 1.278
- Age 64+ factor
- 3.000
- ICHRA age limit
- Oldest ≤ 3× youngest, per class
The federal default age curve
ACA-compliant individual and small-group plans can vary premiums by age, but no more than 3 to 1 for adults. CMS publishes a default curve that most states use. It's flat in the early 20s, rises slowly through the 30s and steeply after 45.
| Age | Factor | $400 at 21 becomes |
|---|---|---|
| 21 to 24 | 1.000 | $400 |
| 30 | 1.135 | $454 |
| 35 | 1.222 | $488.80 |
| 40 | 1.278 | $511.20 |
| 45 | 1.444 | $577.60 |
| 50 | 1.786 | $714.40 |
| 55 | 2.230 | $892 |
| 60 | 2.714 | $1,085.60 |
| 64 and older | 3.000 | $1,200 |
Children under 15 have a factor of 0.765, and ages 15 to 20 rise from 0.833 to 0.970. Those apply to dependents' premiums; an ICHRA's family allowance can reflect them.
The ICHRA rules on varying allowances by age
- Allowances can increase with age within an employee class, as long as everyone in the class of the same age gets the same amount.
- The 3:1 limit. The amount for the oldest participants can't be more than three times the amount for the youngest in the same class.
- Family size can vary too. You can set separate amounts for employee-only, employee plus spouse, and family, and age-scale each.
- Classes are separate. Each class, such as full-time, part-time, or employees in a different rating area, can have its own base amount.
- Same terms within a class otherwise. You can't give higher allowances to particular people outside these rules.
Worked examples
How to choose the base amount
The base allowance for your youngest employee decides everyone else's. Most companies set it so that it covers a particular plan in full or in part, then let the age curve do the rest.
- Pick a benchmark plan Usually the lowest-cost or second-lowest-cost silver plan where most of your team lives. HealthCare.gov or your state exchange shows prices by age and ZIP code.
- Look up its price at your youngest age For example, a silver plan at $450 a month for a 25-year-old.
- Decide what share you want to cover Covering 100% of the benchmark at every age is generous; 70% to 90% is common.
- Scale by age Enter the base here and check the oldest employee's amount against your budget.
- Check affordability if you have 50+ full-time employees Each full-time employee's allowance must make the lowest-cost silver plan affordable. Lower-paid older employees are the usual problem.
Family allowances and age
Most ICHRAs set separate amounts for employee only, employee plus spouse, employee plus children and family. You can age-rate each tier using the employee's age, which is the simplest approach and what most administrators support.
| Tier | Age 25 base | Age 45 (×1.444 ÷ 1.004) | Age 60 (×2.714 ÷ 1.004) |
|---|---|---|---|
| Employee only | $400 | $575.30 | $1,081.27 |
| Employee + spouse | $800 | $1,150.60 | $2,162.55 |
| Employee + children | $700 | $1,006.77 | $1,892.23 |
| Family | $1,100 | $1,582.07 | $2,973.51 |
The 3:1 limit applies within each tier: the oldest employee-only amount can't exceed three times the youngest employee-only amount, and so on.
Combining age rating with employee classes
ICHRA lets you set different allowances for different classes of employees, and age-rate within each class. The permitted classes are defined in the regulations, and you can combine some of them.
| Class | Example use |
|---|---|
| Full-time and part-time | A higher allowance for full-time staff |
| Salaried and hourly | Different amounts for office and shift workers |
| Rating area (location) | Higher allowances where premiums are higher |
| Seasonal employees | A separate amount, or none |
| Employees in a waiting period | No allowance until eligible |
| Non-resident aliens with no U.S. income | Excluded |
Location classes are the most useful companion to age rating. Individual premiums vary as much by place as by age, so a team spread across states often uses one class per major rating area, each with its own base amount scaled by age. Some classes carry minimum size rules when you also offer a group plan to other employees.
Explaining age-based allowances to your team
Employees will compare allowances, and a younger employee may wonder why a colleague gets twice as much. The clearest explanation is that the allowance follows the price of insurance, not the person: everyone gets the same share of a comparable plan at their age, which is how individual premiums are set by law.
- Show the benchmark. "Your allowance covers about 85% of the second-lowest-cost silver plan for your age."
- Point out what's equal. Everyone in the class gets the same share of the same kind of plan.
- Put it in the ICHRA notice. The required notice tells each employee their allowance; adding the method avoids questions later.
- Revisit it each year. Individual premiums change every January, so update the base amount at renewal and re-run the ages. Employees also move up the curve as they age, so their allowance rises automatically.
Should you age-rate your ICHRA?
A flat allowance is simpler, but it favors young employees. If every employee gets $500, a 25-year-old may get a plan for free while a 60-year-old still pays $600 a month. Age-rating gives each employee about the same buying power and is what I'd recommend for most teams with a wide age range.
It also matters for the ACA. If you have 50 or more full-time employees, each one's allowance has to make the lowest-cost silver plan affordable. Older employees are the ones a flat allowance most often fails. Check each age with the ICHRA affordability calculator, and see our ICHRA contribution strategy guide for how to pick the base amount.
Age-rated allowances with Prescience Choice
Choice sets allowances by class, family size and age, and shows each employee their allowance next to the plans available where they live.
Price an ICHRA for your team
Compare a monthly allowance and administration costs with Prescience Choice. Each employee chooses an individual plan.
