What are CHOICE Arrangements
CHOICE Arrangements are an employer-funded health benefit that allows employees to choose their own individual health insurance coverage. The employer establishes the benefit, determines how much to contribute, and reimburses employees for eligible expenses according to the plan.
CHOICE Arrangements are also known as Individual Coverage Health Reimbursement Arrangements, or ICHRAs.
The public-facing name may be changing, but ICHRA remains the term used in federal regulations and current compliance materials.
CHOICE Arrangements: The Bridge to Where Benefits are Going
Instead of selecting one group health plan for everyone, an employer provides eligible employees with a defined monthly contribution. Employees choose qualifying individual health coverage that fits their needs, and the CHOICE Arrangement reimburses eligible expenses up to the amount available under the plan.
This approach gives employers greater control over their benefits budget while giving employees more choice over their health insurance.
How CHOICE Arrangements Work
- The employer designs the benefit. The employer determines eligibility, contribution amounts, permitted employee classes, and which eligible expenses the plan will reimburse.
- Employees choose individual coverage. Employees select qualifying individual health insurance or Medicare coverage that fits their needs.
- The employer helps fund the cost. Employees receive tax-free reimbursements up to the amount made available under the plan.
- The plan is administered throughout the year. Eligibility, coverage verification, reimbursements, notices, reporting, and ongoing compliance responsibilities must be managed.
Why Employers Consider CHOICE Arrangements
- More predictable employer contributions
- Greater individual health plan choice for employees
- Options for multistate and distributed workforces
- Tax-free reimbursements for eligible expenses
- Flexible plan designs using permitted employee classes
- An alternative to traditional group health insurance
- A potential ACA compliance strategy for Applicable Large Employers when properly designed
Could a CHOICE Arrangement Fit Your Organization
A CHOICE Arrangement may be worth exploring if your organization:
- Is offering health benefits for the first time
- Is facing another difficult traditional group health plan renewal
- Has employees working across multiple states
- Wants to establish a defined contribution health benefit
- Wants employees to choose individual coverage
- Needs a benefit strategy that can accommodate different permitted employee classes
CHOICE Arrangement or ICHRA
They are two names for the same benefit.
CMS and the U.S. Small Business Administration are using CHOICE Arrangement as the government-facing name for the Individual Coverage Health Reimbursement Arrangement. The public terminology is changing, but the underlying benefit has not changed.
ICHRA remains the term used in federal regulations and current compliance materials. Employers should not assume that existing plan documents, notices, or compliance responsibilities have changed because of the new branding.
CHOICE is ICHRA. ICHRA is CHOICE.
What Coverage Can Employees Use?
To receive reimbursements through a CHOICE Arrangement, an employee must be enrolled in qualifying individual health coverage or Medicare. Eligible coverage can include:
- ACA-compliant individual health insurance purchased through a Marketplace
- ACA-compliant individual health insurance purchased outside a Marketplace
- Medicare Part A and Part B
- Medicare Advantage, also known as Medicare Part C
Short-term medical plans, health care sharing ministries, fixed indemnity coverage, and group health plans do not qualify as the individual coverage required to participate in a CHOICE Arrangement.
The Name Is New and the Responsibilities Remain
A CHOICE Arrangement remains an employer-sponsored health benefit subject to federal requirements. Employers still need to address:
- Formal plan documents
- Required employee notices
- Qualifying individual coverage or Medicare
- Claim review and substantiation
- Permitted employee-class rules
- ACA affordability and employer-mandate responsibilities when applicable
- ERISA, COBRA, PCORI, and applicable reporting requirements
The right plan design and ongoing administration help protect the employer and create a clearer experience for employees.
You Found a Team That Can Help
Understanding a CHOICE Arrangement is the first step. Establishing and administering one requires thoughtful plan design, formal plan documents, employee communication, coverage verification, reimbursement administration, and ongoing compliance support.
Choice-Arrangements.com is supported by Flyte HCM, an experienced benefits administrator helping employers establish and administer ICHRAs, now also known as CHOICE Arrangements, across all 50 states.
Whether you are an employer exploring a new benefit or a broker helping a client evaluate options, Flyte HCM can support the plan design, implementation, and ongoing administration of the CHOICE Arrangement.
How Flyte HCM Can Help
- Plan design and contribution strategy
- Employee-class and eligibility decisions
- Broker and enrollment-partner coordination
- Formal plan documents and required notices
- Employee onboarding and education
- Individual coverage verification
- Claim review and substantiation
- Premium and eligible expense reimbursements
- Employer and employee technology
- Ongoing administration and member support
- ACA affordability and reporting coordination
- Coordination with other tax-advantaged benefits and compliance services
- Annual renewals and plan updates
Frequently Asked Questions
Employers work with a benefits administrator to support plan documents, employee communications, coverage verification, reimbursements, reporting, technology, and ongoing compliance responsibilities. Flyte HCM provides CHOICE Arrangement and ICHRA administration in all 50 states.
Yes, if the employer designs the plan to reimburse eligible medical expenses in addition to premiums. Employers may also choose a premium-only design.
An employee cannot receive both a premium tax credit and ICHRA reimbursements for the same coverage period. The interaction depends on the affordability of the employer’s offer and whether the employee accepts or opts out of the arrangement.
Yes. Eligible employees select qualifying individual health insurance or Medicare coverage. The employee owns the individual policy and can usually keep it after leaving employment if the employee continues paying the premium, although employer reimbursements end when eligibility ends.
Employers of any size can establish an ICHRA, subject to the applicable plan design and federal requirements. Applicable Large Employers must also consider ACA affordability and employer-mandate responsibilities.
The federal regulations continue to use ICHRA terminology. The new government-facing branding does not by itself change existing plan documents, required notices, or compliance responsibilities.
In the current CMS and SBA branding, CHOICE is presented as the name of the arrangement and not as an acronym. Proposed legislation has used CHOICE as an acronym, but that legislation is separate from the current government branding initiative.
Yes. CHOICE Arrangement is the government-facing name now being used by CMS and SBA for the benefit established as an Individual Coverage Health Reimbursement Arrangement, or ICHRA.
