Choice Arrangement

Key Points

• The bill formally defines a new type of employer health benefit called a 'custom health option and individual care expense arrangement' (CHOICE arrangement), which is an employer-funded account that can only be used while a worker has individual market or Medicare coverage.
• Small employers (those not subject to the ACA's large-employer mandate) that set up a CHOICE arrangement get a new tax credit of up to $100 per enrolled employee per month in the first year and $50 per month in the second year.
• Employers must offer the same CHOICE arrangement terms to everyone within a defined group of workers, like all full-time or all part-time staff, and generally cannot offer a different group health plan to that same group.
• Workers enrolled in a CHOICE arrangement are allowed to pay any remaining individual insurance premium using pre-tax salary through a cafeteria plan, which is normally not allowed for individual market plans bought outside an exchange.
• All of these new rules, the tax credit, and reporting requirements would apply starting with plan years and tax years that begin after December 31, 2025.