TL;DR: ICHRA affordability in 2026 is not one national allowance number. IRS guidance sets the affordability percentage at 9.96 percent, but CMS lowest cost silver plan data changes by age and geography. A $20 per hour employee can need about $327 per month in Harris County, Texas and about $797 per month in Kanawha County, West Virginia for an affordable age 40 offer.

Why 2026 ICHRA affordability needs local math

ICHRA looks simple when an employer first hears the pitch.

Set a monthly allowance. Let employees buy individual market coverage. Control the company budget. Give workers choice.

That is the clean version. The renewal version is messier.

For 2026, the required contribution percentage is 9.96 percent for plan years beginning in calendar year 2026 under IRS Revenue Procedure 2025 25. That percentage helps decide whether the employee contribution for coverage is affordable.

But ICHRA affordability is not tested against the employer allowance by itself. It is tested against the employee cost after the allowance is subtracted from the lowest cost silver plan available to that employee.

That means the county, ZIP code, rating area, and age can move the required employer contribution by hundreds of dollars per month.

Employers that model ICHRA with one flat national number are not really modeling affordability. They are modeling a budget target and hoping the local market cooperates.

The 2026 formula in plain English

The operating formula is straightforward:

Lowest cost silver premium minus employer ICHRA allowance equals employee required contribution.

That employee required contribution must fit inside the applicable affordability limit. For many employer planning models, the rate of pay safe harbor is a practical starting point because it uses wages the employer already knows.

For a $20 per hour employee, the monthly rate of pay safe harbor uses 130 hours:

If the local lowest cost silver premium is $586.21, the employer allowance needs to be about $327.25 for that age and location.

If the local lowest cost silver premium is $1,055.63, the employer allowance needs to be about $796.67.

Both calculations use the same wage and the same 2026 IRS percentage. The difference is local premium data.

CMS data shows why county changes the answer

CMS publishes ICHRA Employer Lowest Cost Silver Plan Premium Look-up Table data to help employers access lowest cost silver plan premium data by geographic location. The CMS data dictionary says the table includes individual market Qualified Health Plan lowest cost silver plan rates based on age and geographic location, and that the table covers states on HealthCare.gov and state based exchanges on the federal platform.

The table does not cover every state based marketplace that operates outside HealthCare.gov. Employers in those states need the state marketplace source or a vendor dataset that maps the same plan year data.

Using the CMS 2026 ICHRA Employer LCSP table for an age 40 employee, the county spread is large:

At $20 per hour, the affordability ceiling is still $258.96 per month. So the approximate allowance needed for an age 40 affordable offer ranges from about $126.02 in Genesee County to about $1,013.05 in Monroe County.

That is not a small plan design detail. It is the difference between an ICHRA that works on paper and an ICHRA that produces unaffordable offers for a meaningful part of the workforce.

A flat allowance can pass in one market and fail in another

Assume a multi location employer wants to offer one $400 monthly ICHRA allowance to the same class of employees.

For an age 40 employee in Harris County, Texas, the $586.21 lowest cost silver premium minus a $400 allowance leaves a $186.21 employee cost. That fits under the $258.96 monthly ceiling for a $20 per hour worker.

For an age 40 employee in Kanawha County, West Virginia, the $1,055.63 lowest cost silver premium minus the same $400 allowance leaves a $655.63 employee cost. That does not fit under the same wage based ceiling.

Same employer. Same class. Same allowance. Same hourly wage.

Different county, different result.

This is why employers should not wait until enrollment to find out whether their ICHRA design is affordable. The first draft needs a county rate map.

The age curve can change the answer again

County is not the only variable. Individual market premiums also vary by age.

In Kanawha County, West Virginia, the CMS 2026 table shows these lowest cost silver premiums for the same plan and location:

The same $20 per hour employee still has the same $258.96 monthly affordability ceiling if the employer uses the rate of pay safe harbor.

That means the approximate allowance needed is:

This does not mean every employer must fund every age at the same take home result. It does mean the employer needs to know what its class design creates.

ICHRA can vary by permitted classes and can vary by age under the ICHRA rules, subject to nondiscrimination and other legal limits. That flexibility is useful only when the employer models it before setting the budget.

What employers should model before choosing ICHRA

A serious ICHRA review should start with the same discipline as a group renewal review.

First, map employees by home ZIP code, county, age, wage band, employment class, and current election tier. Do not model only the headquarters county unless nearly every employee lives there.

Second, pull the 2026 lowest cost silver plan rate for each employee location and age. For states in the CMS table, use the CMS ICHRA LCSP source or a vendor that traces back to it. For state based marketplaces outside the federal platform, use the state source.

Third, choose the affordability safe harbor that the employer plans to use. Rate of pay may work cleanly for hourly populations. W 2 wages may better reflect salaried pay. Federal poverty line can be simpler, but it may require higher contributions for some groups.

Fourth, test the allowance design by employee class. A single allowance, age banded allowance, location banded allowance, or class based allowance can produce very different employee outcomes.

Fifth, compare the ICHRA result against the current group plan, not against an abstract budget target. The employer should know who improves, who worsens, who loses network fit, and who needs communication support.

Benefitra uses this same practical lens when comparing ICHRA, fully insured, and level funded options. The right structure is the one that survives both the spreadsheet and the employee meeting.

When ICHRA is most likely to fit

ICHRA can be attractive when the employer has locations in individual markets with competitive silver premiums, when employees are already spread across multiple carrier service areas, or when the group renewal has become hard to stabilize.

It can also help employers that want a defined contribution strategy instead of another year of absorbing renewal volatility.

But it is not automatically cheaper once affordability is modeled correctly.

If many workers live in high premium counties, if the workforce skews older, or if the current group plan has unusually efficient employer pricing, the required ICHRA allowance can be higher than the initial budget target.

That is not a reason to ignore ICHRA. It is a reason to test it honestly.

A better planning question

The usual ICHRA question is, what allowance should we offer?

For 2026, the better question is, which employees does this allowance actually make affordable in their county?

That question changes the analysis. It forces the employer to connect IRS affordability rules, CMS premium data, wage safe harbors, and workforce geography before renewal decisions are locked.

It also prevents a common mistake. A plan sponsor may see the 2026 affordability percentage rise to 9.96 percent and assume there is more room to shift cost to employees. In group plan testing, that may be partly true for employee only coverage. In ICHRA design, local silver plan prices can consume that room quickly.

Employers should model the county math before they announce a number.

For related planning, see Benefitra’s guide to the 2026 ACA affordability family premium gap. Group plan affordability and ICHRA affordability are different tests, but both can hide employee cost problems when the employer only looks at the compliant minimum.

Frequently Asked Questions

What is the ICHRA affordability percentage for 2026?

For plan years beginning in calendar year 2026, IRS Revenue Procedure 2025 25 sets the required contribution percentage at 9.96 percent.

What premium is used for ICHRA affordability?

ICHRA affordability uses the lowest cost silver plan available to the employee for employee only coverage, after subtracting the employer ICHRA allowance. CMS publishes an ICHRA LCSP look-up table for HealthCare.gov states and state based exchanges on the federal platform.

Does ICHRA affordability change by county?

Yes. The lowest cost silver plan premium can change by geographic location. In the CMS 2026 table, an age 40 premium is $586.21 in Harris County, Texas and $1,055.63 in Kanawha County, West Virginia.

Can an employer use one flat ICHRA allowance?

Sometimes, but the employer should test the flat allowance against employee age, location, wage safe harbor, and class design. A flat allowance can be affordable in one county and unaffordable in another.

Is ICHRA better than a group health plan in 2026?

Not automatically. ICHRA may work well for some employers, especially distributed groups with unstable renewals. A group health plan may still be stronger when employee networks, family tiers, and employer pricing are favorable.