The “One, Big, Beautiful Bill,” advanced by the U.S. House Ways and Means Committee on May 14, 2025, proposes significant reforms to Individual Coverage Health Reimbursement Arrangements (ICHRAs). These reforms aim to enhance flexibility, provide tax incentives, and solidify the legal framework for ICHRA . SOURCE
Key Proposed Changes to ICHRA:
1. Rebranding to CHOICE Arrangement
The bill proposes renaming ICHRAs to “Custom Health Option and Individual Care Expense” (CHOICE) Arrangements. This rebranding reflects a commitment to defined contribution health benefits and aims to provide long-term stability by codifying ICHRAs into federal law. SOURCE
2. Permanent Legal Status
While ICHRAs have been available since 2020 through executive orders and departmental regulations, the bill seeks to enshrine them into federal statute. This move would ensure their permanence, making them less susceptible to changes by future administrations. SOURCE
3. Tax Credits for Small Businesses
To encourage adoption among small businesses (those with fewer than 50 employees), the bill introduces a two-year tax credit:
- Year 1: $100 per employee per month
- Year 2: $50 per employee per monthRemodel Health
Eligibility requires that employees be part of the CHOICE Arrangement and have minimum essential coverage. SOURCE
4. Pre-Tax Salary Reductions for Individual Premiums
Currently, employers can offer pre-tax deductions for off-exchange plans and Medicare. The bill proposes allowing pre-tax payments for individual health insurance premiums through public exchanges, enhancing affordability for employees. SOURCE
5. Flexibility in Offering CHOICE and Group Plans
Under existing rules, employers cannot offer both a group health plan and an ICHRA to the same class of employees. The proposed changes would allow small businesses (non-ALEs) to offer both options to the same class, providing greater flexibility in benefits offerings. SOURCE
6. Potential for New Employee Classes
The bill grants the Secretary of Health and Human Services the authority to introduce new employee classes through regulation, allowing for more tailored benefits structures in the future. SOURCE
7. Reduced Notice Period
The required notice period for employers to inform employees about the CHOICE Arrangement would decrease from 90 days to 60 days, facilitating quicker implementation. SOURCE
Implementation Timeline
If enacted, these changes would take effect for plan years beginning on or after January 1, 2026. SOURCE
Implications for Employers and Employees
These proposed reforms aim to provide employers, especially small businesses, with more flexible and cost-effective health benefit options. Employees could benefit from increased plan choices and potential tax advantages. SOURCE
For a detailed breakdown of the bill’s provisions, you can refer to the section-by-section summary provided by the House Ways and Means Committee.waysandmeans.house.gov
I am continuously amazed that most plan sponsors have never heard of ICHRA. Legacy health insurance brokers and consultants are not pushing it. Could it be ICHRAs are bad or is it because brokers and consultants lose relevancy and earn less?
