ICHRAs (Now CHOICE Arrangements): Transforming Employee Health Benefits
Written by the licensed agents at Health Plans of NC, an insurance agency authorized by Blue Cross NC.
Written by the licensed agents at Health Plans of NC, an insurance agency authorized by Blue Cross NC.
In September 2026, CMS and the SBA renamed the ICHRA the CHOICE Arrangement. The rules haven't changed, so you'll still see both names used.
CHOICE Arrangements—formerly called Individual Coverage Health Reimbursement Arrangements (ICHRAs)—are transforming how employers provide health benefits, offering a flexible, scalable alternative to traditional group health insurance. Introduced as ICHRAs in 2020 under regulations from the Departments of Health and Human Services, Labor, and Treasury, CHOICE Arrangements allow businesses of all sizes to reimburse employees for individual health insurance premiums and qualified medical expenses.
What is a CHOICE Arrangement?
A CHOICE Arrangement is a tax-advantaged health benefit plan that enables employers to reimburse employees for premiums paid on individual health insurance policies, typically purchased through the Affordable Care Act (ACA) Marketplace, as well as other eligible medical expenses, such as copays, deductibles, or prescriptions. Unlike Qualified Small Employer HRAs (QSEHRAs), which are limited to businesses with fewer than 50 full-time employees, CHOICE Arrangements are available to employers of any size. They can be offered alongside group health plans or as a standalone benefit. Employees must enroll in ACA-compliant individual coverage (or Medicare, if eligible) to receive reimbursements, which are tax-free for both parties.
CHOICE Arrangements have no IRS-imposed cap on reimbursement amounts, giving employers significant flexibility to set contribution levels. Employers can also customize offerings by employee class—such as full-time versus part-time workers, salaried versus hourly employees, or by geographic location—provided they meet the applicable nondiscrimination rules. This adaptability makes CHOICE Arrangements a powerful tool for diverse workforces. Video
CHOICE Arrangements allow employers to tailor benefits to their budget and workforce needs. A small startup might offer a modest $300 monthly reimbursement, while a larger firm could provide $1,000 or more, depending on the employee class. Employees, in turn, gain the freedom to choose individual health plans that best suit their medical needs, providers, or family circumstances, whether through the ACA Marketplace or private insurers.
Traditional group health plans often come with unpredictable premium increases and claim costs. CHOICE Arrangements shift to a defined-contribution model, where employers set fixed reimbursement amounts, ensuring budget stability. For example, a company with 100 employees, offering $500 per month per employee, caps its annual liability at $600,000, avoiding the volatility of group insurance. This predictability is a boon for businesses navigating economic uncertainty.
Unlike QSEHRAs, CHOICE Arrangements have no restrictions on employee size, making them ideal for both small businesses and large corporations. Small employers, meanwhile, utilize CHOICE Arrangements to offer competitive benefits without the administrative burden associated with group plans.
CHOICE Arrangements are supported by a growing ecosystem of third-party administrators and HR platforms that streamline setup, compliance, and reimbursement processing. These tools handle IRS reporting, employee notifications, and expense verification, reducing administrative overhead. Employers can integrate CHOICE Arrangements with payroll systems, ensuring seamless delivery of benefits while employees manage their insurance selections.
In a competitive labor market, CHOICE Arrangements help employers attract and retain talent. By offering personalized health benefits, businesses signal a commitment to employee well-being.
CHOICE Arrangements require careful compliance with federal regulations, including annual notices and ensuring employees have qualifying coverage. Employees may need education to navigate the ACA Marketplace or understand reimbursement processes, particularly if they are new to buying individual coverage. Employers can mitigate these challenges by partnering with benefits brokers or leveraging HR software.
As businesses seek innovative, cost-effective ways to support employees, CHOICE Arrangements are poised for continued growth. Their flexibility, scalability, and alignment with the ACA Marketplace make them a cornerstone of modern benefits strategies. By empowering both employers and employees, CHOICE Arrangements are redefining how health benefits are delivered, fostering a more dynamic and equitable workplace.