State-Based Marketplace (SBM) Guide for ICHRA

If you've spent any time looking into health insurance for your small business or your employees, you've almost certainly run into the phrase "State-Based Marketplace" — or its acronym, SBM. It sounds bureaucratic, and in some ways it is. But if you're offering or considering an Individual Coverage Health Reimbursement Arrangement (ICHRA), understanding what an SBM is, how it works, and how it differs from the federal exchange is essential.

CHOICE (Custom Health Option and Individual Care Expense) Arrangement is the current name for what was previously referred to as an ICHRA (Individual Coverage Health Reimbursement Arrangement). This page uses both terms.

An SBM isn't just a website where individuals buy health plans. It's the regulatory and operational hub that determines which plans are available to your employees, what those plans cost, how subsidies are calculated, and what enrollment deadlines apply. If your workforce is spread across multiple states — say, you have employees in California, Colorado, and Texas — your team will be interacting with entirely different marketplaces depending on where they live.

This guide breaks down everything small business owners, HR managers, and employees need to know about State-Based Marketplaces, specifically through the lens of ICHRA administration.

What Is a State-Based Marketplace (SBM)?

A State-Based Marketplace (SBM) is a state-administered health insurance exchange created under the Affordable Care Act (ACA). It serves as the official platform where individuals and families can shop for, compare, and enroll in ACA-compliant individual health insurance plans, as well as apply for federal financial assistance like Advance Premium Tax Credits (APTCs) and Cost-Sharing Reductions (CSRs).

Under the ACA, each state was given a choice: build and run its own health insurance exchange, or let the federal government handle it through HealthCare.gov. States that chose the former are State-Based Marketplaces.

Some well-known examples include:

• Covered California (California)
• Connect for Health Colorado (Colorado)
• Pennie (Pennsylvania)
• NY State of Health (New York)
• Washington Healthplanfinder (Washington)
• MNsure (Minnesota)
• Get Covered New Jersey (New Jersey)

Each SBM is responsible for its own technology platform, consumer assistance (call centers and navigators), marketing and outreach, and carrier oversight. They also set their own open enrollment dates, which can differ from the federal schedule.

The Marketplace Spectrum: SBM, SBM-FP, and FFE

Not all state exchanges operate the same way. The Centers for Medicare & Medicaid Services (CMS) categorizes state marketplaces into three primary models:

1. State-Based Marketplace (SBM)

The state handles everything: governance, consumer support, plan certification, and the technology platform where consumers shop and enroll. Examples include California, New York, Pennsylvania, and New Jersey.

2. State-Based Marketplace on the Federal Platform (SBM-FP)

The state has legal authority over its marketplace and handles plan management, outreach, and consumer assistance, but it uses the federal website (HealthCare.gov) for eligibility determinations and plan shopping. It's essentially a hybrid model. Examples have included states like Oregon and Arkansas during transition phases.

3. Federally-Facilitated Exchange (FFE)

The federal government runs the entire show through CMS and HealthCare.gov. The state plays no formal role in managing the exchange. Examples include Texas, Florida, and Ohio.

Why State-Based Marketplaces Matter for ICHRA

An ICHRA works by having employers give employees a monthly, tax-free allowance to buy their own individual health insurance. Employees then select an individual health plan, pay the premiums (or have them facilitated through payroll coordination), and then receive reimbursement up to their allowance limit.

This is where SBMs come in. Your employees aren't enrolling in a company group plan; they're enrolling in individual health plans, and many will use their state's marketplace to do it.

Here's why that distinction is critical for employers offering an ICHRA:

1. Enrollment Windows Vary by State

The federal marketplace (HealthCare.gov) generally runs Open Enrollment from November 1 through January 15. But State-Based Marketplaces have the legal authority to set their own enrollment dates, and many extend them significantly:

• Covered California: Often extends Open Enrollment through January 31.
• NY State of Health: Frequently extends Open Enrollment through January 31 or later.
• Pennie (PA): Typically runs through January 15, with special extensions in certain years.
• DC Health Link: Often runs through January 31.

If you're rolling out an ICHRA or onboarding new employees, you need to know which marketplace governs each employee's coverage and what deadlines apply to them.

Important Note on Special Enrollment Periods (SEPs): A newly offered ICHRA triggers a Special Enrollment Period (SEP) for employees, giving them a 60-day window to enroll in an individual health plan, regardless of whether the state is in general Open Enrollment. This SEP applies whether the employee uses HealthCare.gov or a State-Based Marketplace.

2. Plan Options, Metal Tiers, and Pricing Differ Dramatically

In a traditional group plan, you pick the carrier, and everyone gets that carrier's network. With an ICHRA, the plan options depend entirely on what carriers participate in the employee's local marketplace.

In an SBM like Covered California, employees might choose among Kaiser Permanente, Blue Shield of California, Health Net, and Oscar Health. In a rural county in an FFE state like Wyoming, there might only be one or two carriers available on the exchange.

This geographic variability affects:

• Plan costs: An employee in Manhattan might face higher premiums than an employee in Boise, Idaho.
• Network types: Some SBMs are dominated by HMOs and EPOs, while others have broad PPO availability.
• Affordability calculations: For employers subject to the ACA's employer shared responsibility mandate (ALEs with 50+ FTEs), the ICHRA affordability calculation relies on the Lowest Cost Silver Plan (LCSP) in the employee's rating area. In SBM states, that LCSP data comes from the state marketplace, not HealthCare.gov.

3. State-Specific Subsidies and Tax Credits

While federal Advance Premium Tax Credits (APTCs) are available nationwide, some states with SBMs offer state-level premium subsidies on top of federal help. California, Massachusetts, and New Jersey have all implemented state-funded subsidy programs at various times to make individual coverage more affordable for middle-income residents.

This is relevant because of the ICHRA opt-out / subsidy interaction:

• An employee who accepts an affordable ICHRA offer is ineligible for federal premium tax credits (and by extension, state-level subsidies).
• An employee who is offered an unaffordable ICHRA can opt out of the ICHRA and claim their marketplace subsidies instead.

Because SBM states sometimes provide richer subsidies, employees in those states may do their own math comparing your ICHRA allowance to what they could get through the exchange. Understanding this dynamic helps you set competitive allowance amounts.

4. State Individual Mandates

While the federal ACA individual mandate penalty was reduced to $0 under the Tax Cuts and Jobs Act of 2017, several states with SBMs enacted their own state-level individual health insurance mandates with real financial penalties for going uninsured:

• California: State tax penalty enforced via the Franchise Tax Board.
• Massachusetts: Enforced through the Department of Revenue (has had a mandate since 2006).
• New Jersey: New Jersey Health Insurance Market Preservation Act.
• Rhode Island: State individual mandate with tax penalties.
• District of Columbia: Individual mandate enforced through local tax returns.

If you have employees in these states, an ICHRA helps them secure qualifying Minimum Essential Coverage (MEC) and avoid state tax penalties. That's a major selling point when communicating the benefit to your workforce.

Key SBM States and Their Marketplaces

Below is a snapshot of prominent State-Based Marketplaces as of 2026:

Note: Additional states, including Virginia, have recently transitioned or are actively transitioning to full SBM status. Always check the current status for the states where your employees reside.

The Employer's Challenge: Managing SBM Variability

If you're a small business owner running a single location with five employees in one state, dealing with a State-Based Marketplace is fairly straightforward. You learn that state's deadlines, point your employees to that state's exchange website, and reimburse them through your ICHRA.

The complexity explodes when your team is distributed across state lines.

Consider this real-world scenario for a 25-person remote company:

• 8 employees in California: Enrolling through Covered California. Open enrollment ends January 31. State individual mandate applies. State-specific carrier networks (Kaiser, Blue Shield).
• 5 employees in New York: Enrolling through NY State of Health. Different plan designs, no rating by age allowed (NY is a pure community-rated state).
• 4 employees in Texas: Enrolling through HealthCare.gov (FFE). Open enrollment ends January 15. Age-rated premiums. Broad carrier options in cities, limited in rural areas.
• 8 employees across Pennsylvania, Colorado, and Florida: A mix of two different SBMs and one FFE state.

In this scenario, you're not managing one health benefits program. You're navigating four different marketplace systems, three distinct enrollment timelines, different rating methodologies, and multiple state tax compliance environments.

Doing this manually with spreadsheets is an administrative disaster waiting to happen.

How SimplyHRA Solves the SBM Problem

This multi-state marketplace friction is precisely why SimplyHRA was built.

SimplyHRA abstracts away the complexity of State-Based Marketplaces and HealthCare.gov, giving employers and employees a unified, intuitive experience regardless of where team members live.

For Employers:

• Automated Affordability Calculations: SimplyHRA dynamically pulls Lowest Cost Silver Plan data from every exchange — whether SBM or FFE — so your ALE affordability safe harbors are always calculated accurately.
• Employee Class Management: Create distinct ICHRA classes based on geographic rating area, employee type, or state, allowing you to tailor allowance amounts to local cost-of-living differences.
• Universal Payroll Integration: If you're a small business running payroll through Gusto, ADP, or another provider, SimplyHRA generates clean, standardized deduction files, eliminating manual entry errors.
• Compliance and Notice Automation: Generate and distribute required 90-day ICHRA notices, ERISA Summary Plan Descriptions (SPDs), and annual 1094-C/1095-C reporting documents without hiring an expensive benefits consultant.

For Employees:

• Smart Plan Shopping: Employees don't have to figure out whether to visit HealthCare.gov or a state portal on their own. SimplyHRA's platform guides them directly to the appropriate plans available in their ZIP code.
• Pre-Funded Virtual Debit Cards: Instead of making employees pay thousands of dollars in premiums upfront and wait weeks for reimbursement, SimplyHRA can provide pre-funded cards that pay carriers directly.
• Clear Guidance on Subsidies: Built-in calculators explain whether the company's ICHRA allowance is considered "affordable" under ACA rules and how accepting the allowance interacts with marketplace tax credits.

Frequently Asked Questions (FAQs)

Can employees use an ICHRA to buy plans on a State-Based Marketplace?

Yes. An ICHRA can reimburse individual health insurance policies purchased on an SBM, on the federal exchange (HealthCare.gov), or directly from a carrier off-exchange (through a broker or carrier website). As long as the plan qualifies as Minimum Essential Coverage (MEC) and meets ACA individual coverage standards, it is eligible for ICHRA reimbursement.

Can an employee get both an ICHRA and an SBM subsidy (APTC)?

No, not for the same month. Under federal law, if an employer offers an ICHRA that is considered "affordable" under the ACA, the employee is ineligible for Advance Premium Tax Credits (and any associated state subsidies) on the marketplace. If the ICHRA is unaffordable, the employee can choose to opt out of the ICHRA and take the tax credit instead, but they cannot collect both simultaneously.

Do SBMs share data directly with employers?

Generally, no. State-Based Marketplace platforms don't integrate with your payroll system. They're consumer-facing portals designed for individuals. That's why third-party administration platforms like SimplyHRA are essential: they bridge the gap between individual marketplace enrollment and employer payroll and compliance systems.

What happens if an employee moves to a different state mid-year?

Moving to a new state triggers a Special Enrollment Period (SEP) on the new state's marketplace (or HealthCare.gov), allowing the employee to select a new plan in their new location. From an ICHRA perspective, the employer may adjust the employee's allowance if the company uses geographic employee classes, or keep it the same while the employee switches to a local carrier.

The Bottom Line

State-Based Marketplaces are the engines of the individual health insurance market in nearly twenty states. For employers adopting an ICHRA, SBMs provide the individual plans your employees will actually use.

Understanding their deadlines, carrier mixes, and subsidy rules is critical. But you don't have to be an expert in fifteen different state portals to offer an outstanding, multi-state health benefit.

SimplyHRA brings it all together in one platform. Flat-rate $29 PEPM pricing. No setup fees. No broker commissions. Just clean, automated ICHRA management that works across every state line.

Schedule a demo with SimplyHRA today to see how easy it is to manage an ICHRA across State-Based Marketplaces nationwide.