In May 2025, Congress introduced the One Big Beautiful Bill Act1. This set in motion one of the most comprehensive tax and health benefits overhauls in recent years. While the Senate cut most of the bill’s proposed provisions around health benefits, included the proposed rebranding and expansion of individual coverage health reimbursement arrangements (ICHRAs), it still provides for a promising future for the ICHRA.
For now, ICHRA won’t become the CHOICE Arrangement. But there’s still a chance Congress could introduce legislation to do so. In this blog post, we’ll cover what the One Big Beautiful Bill Act would have done for ICHRA, and what the future looks like.
We updated this blog post on July 10, 2025, with all of the latest information.
In this blog post, you’ll learn:
- How the CHOICE Arrangement differs from the ICHRA
- What changes the bill proposed for HSAs and Medicaid
- What’s next for ICHRA
See how employers designed their ICHRA benefits in 2024 with our report.
ICHRA would have become the CHOICE Arrangement
One of the bill’s most significant proposed changes to health benefits was the formal codification of ICHRA into law. This included a rebrand from ICHRA to the Custom Health Option and Individual Care Expense (CHOICE) Arrangement. This proposed change sends a strong signal: Defined contribution health benefits are here to stay.
An ICHRA allows employers to give their employees a tax-free allowance for individual health insurance premiums. This gives employers a cost-controlled alternative to traditional group health insurance while employees get more plan choices.
Here’s what would’ve changed with ICHRA if it became the CHOICE Arrangement:
- Permanent legal footing. ICHRAs have been available since 2020. However, the federal government introduced them through executive order and departmental regulations. This bill would’ve enshrined ICHRA in federal statute as the CHOICE Arrangement. This would have ensured long-term stability regardless of future presidential administrations.
- A new tax credit for small businesses. To encourage ICHRA adoption, the bill proposed a new two-year tax credit for small businesses with fewer than 50 employees. This credit would provide $100 per employee per month for the first year and $50 per employee per month in the second year. Employees must be eligible for the CHOICE Arrangement and have minimum essential coverage (MEC). This would have been a more significant tax credit than the one Indiana implemented in 2023 or the one Ohio has been considering in 2025.
- Allowing pre-tax salary reductions for individual health insurance premiums. The bill would’ve allowed for the use of pre-tax payments for individual health insurance premiums through the public exchanges. Currently, employers can only offer a pre-tax deduction for off-exchange plans and Medicare.
- The ability to offer a CHOICE Arrangement and group health insurance to the same class of employees for small businesses. The ICHRA allows employers to customize allowances and benefit eligibility with 11 employee classes. This means employers can offer an ICHRA to some classes, like hourly employees, while offering a group plan to another class, like salaried employees. You can’t offer the same class of employees traditional group health coverage and an ICHRA or give them a choice between the two. Under the proposed changes, employers could’ve offered both a group health plan and an ICHRA to the same class if they’re a small business (non-ALEs).
- Potential for new employee classes in the future. The bill would have given the Secretary of Health and Human Services the ability to add new employee classes through regulation.
- It would’ve shortened the ICHRA notice period. Currently, employers should try to give employees at least 90 days’ notice before the ICHRA benefit starts. With the proposed changes, the CHOICE Arrangement would only require a 60-day notice period.
However, the Senate removed the CHOICE Arrangement provisions of the Bill in June 2025. It passed both chambers of Congress and President Trump signed the bill without the CHOICE Arrangement in July 2025.
What these proposed changes to ICHRA mean for employers and insurance professionals
For employers and brokers, these changes, while cut from the final law, represent a huge step forward in health benefit flexibility. This is the second time Congress has proposed legislation to codify ICHRA.
Congress’s continued efforts to codify ICHRA show long-term confidence in its future. This supports a continued shift toward portable, consumer-driven health coverage.
What other health benefits changes did the proposed bill include?
The bill encompassed more than changes to the ICHRA.
Other health benefits-related changes included2:
- Health savings account (HSA) expansions. The bill included various proposals aimed at expanding HSAs. It would’ve allow those entitled to Medicare Part A to contribute to an HSA if they’re enrolled in a high deductible health plan (HDHP).
- Some HSA provisions did survive the Senate and have now become law: Those with HDHPs can enroll in direct primary care plans and use HSA funds to pay for those services, up to $150 per month for individual coverage and $300 per month for family coverage. Another change is which plans individuals can have and contribute to an HSA. Previously, bronze and catastrophic plans didn’t meet the HDHP requirements. Now, all HDHP bronze and catastrophic plans on the public Marketplace are eligible plans for HSAs in 2026.
- Changes to premium tax credit eligibility for non-citizens. Currently, those who are lawfully present in the U.S. can receive premium tax credits through public exchanges. This new law restricts subsidy eligibility to citizens, Lawful Permanent Residents, certain Cuban immigrants, and those with a Compact of Free Association, effective 2027.
- Eliminates premium tax credits for low-income special enrollment periods (SEPs). Currently, those with annual incomes of 150% of the federal poverty line or less can get an SEP and qualify for tax credits. The passed law eliminates tax credits for those individuals using the low-income SEP in 2026.4
- Changes to Medicaid. The law implements many changes to Medicaid, including ending the open-ended federal matching for states and implementing work requirements. Starting January 1, 2029, many individuals are required to prove that they’re working, actively seeking employment, or participating in a job training program to receive Medicaid. The Congressional Budget Office is estimating that as many as 12 million people could become uninsured starting in 2026.
Conclusion
The One Big Beautiful Bill Act passed Congress and became law in July 2025. Even though the final bill didn’t include the proposed changes to ICHRA, it’s still a viable and cost-effective option. Consider whether an ICHRA can provide more flexibility and cost control for your organization or clients.
Learn more about our ICHRA+ administration solution.
Sources:
- House Committee on the Budget
- House Ways and Means Committee
- AP News – Conservatives block Trump’s big tax breaks bill in a stunning setback
- National Academy For State Health Policy
Learn how Remodel Health’s ICHRA+ product is built for the needs of ALEs