Offering a CHOICE Arrangement vs. group health insurance

For decades, traditional group health insurance has been the standard way employers provide health benefits. But rising premiums and demand for more personalized employee benefits are prompting many employers to reconsider traditional coverage methods.

One alternative is the CHOICE Arrangement, formerly known as the individual coverage health reimbursement arrangement (ICHRA). The Centers for Medicare & Medicaid Services (CMS) and Small Business Administration (SBA) announced the new name in September 2026.¹ While the name changed, the underlying benefit and existing ICHRA rules remain the same.

If you’re an employer facing another expensive group health insurance renewal, a CHOICE Arrangement can be a more affordable, flexible way to provide employees with a comprehensive health benefit.

In this blog post, you'll learn:

• How a CHOICE Arrangement compares with traditional group health insurance.
• How CHOICE Arrangements can give employers more control over their healthcare costs and employees more choice.
• Which health benefit may best fit your organization.

What is a CHOICE Arrangement?

A CHOICE Arrangement (formerly ICHRA) is an employer-funded health benefit that allows employees to purchase their own qualified individual health insurance coverage. Instead of selecting a group health insurance policy and enrolling employees in that plan, an employer decides how much money to contribute toward their employees’ individual health coverage. Employees then use that contribution to help pay for their plan’s monthly premiums.

Here's how a CHOICE Arrangement works:

• The employer sets a monthly contribution. Employers determine how much they want to contribute toward their employees' individual health plans. Contributions can vary by family status, age, or employee class, such as geographic location or whether an employee is hourly or salaried.
• Employees choose individual coverage. Employees shop for a qualified individual health insurance plan that works for their doctors, prescriptions, preferred network, coverage needs, and budget.
• To participate in the benefit, employees must have qualifying individual health coverage. Eligible coverage options include Medicare Parts A and B together, Medicare Part C, an ACA-compliant Marketplace or off-exchange individual health plan, or catastrophic individual health coverage.
• The contribution helps pay for coverage. After employees submit proof of coverage, they use their employer-provided contribution to pay the monthly premium. If the premium exceeds their monthly contribution, they pay the difference out of pocket.

What is a group health insurance plan?

A traditional group health insurance plan is an employer-sponsored insurance policy that covers a defined group of employees and, generally, their eligible dependents.

The employer selects the insurance carrier and plan or plans to offer. Employees then choose from the options their employer makes available and typically pay their share of the premium through payroll deductions.

Group health insurance falls into two categories:

1. Fully insured group health plans: With a fully insured plan, the employer pays a premium to an insurance carrier, and the carrier assumes responsibility for employees’ covered medical claims. The carrier determines the employer's premium, which can change when the plan renews. Large group health plans are experience rated, meaning an organization’s healthcare utilization can impact premium rates for the following year. That means employers may face higher premiums from year to year even when their benefits budget hasn't changed.
2. Self-funded group health plans: With a self-funded plan, the employer assumes responsibility for paying employees' covered medical claims rather than paying a traditional fixed premium to a private carrier. Employers often purchase stop-loss insurance or partner with a third-party administrator under a level-funded plan to help protect against unusually high claims. Self-funded plans can give employers more flexibility and potential cost savings. But they also expose employers to greater claims risk and can make annual healthcare costs less predictable.

How does a CHOICE Arrangement compare to group health insurance?

The biggest differences between a CHOICE Arrangement and group health insurance are cost control, employee choice, portability, and administration. However, they share similarities in tax advantages and compliance. We’ll go into each in more detail below.

Cost control

With traditional group health insurance, employers face annual renewals. Fully insured plans can receive higher premiums from carriers, while self-funded plans can experience major cost changes when claims are higher than expected.

With a CHOICE Arrangement, employers establish a contribution amount instead of taking responsibility for the cost of a specific group health plan or individual employee claims. Individual health plans are community rated, so employee premium increases reflect the cost of care for the broader community. This lets employers set their health benefits budget ahead of time and build their benefits strategy around it.

Remodel Health client Hancock Health recently projected $2.2 million in annual savings by switching to a CHOICE Arrangement from a self-funded plan, with an additional $1.5 million in savings for employees.

For organizations dealing with unpredictable group renewals, the defined contribution approach a CHOICE Arrangement offers can make healthcare spending easier to plan for.

Employee choice

Group health insurance gives employees access to the plans their employer selects. Employers may offer multiple group plan options, but the available choices are still limited to the carrier and plans the organization selects.

A CHOICE Arrangement gives employees greater control over their individual coverage.

Employees can choose individual plans based on personal needs and factors such as:

• Monthly premiums
• Deductibles and out-of-pocket costs
• Doctors and hospitals in the network
• Prescription drug coverage
• Plan type and network structure
• Family healthcare needs

This is especially valuable for employers with employees who live in different states. Instead of requiring the entire workforce to use the same group network, employees can select coverage available in their local market.

According to our 2026 National ICHRA Report, employees on the Remodel Health platform selected an average of 14 different plans per employer, compared to one or two options with group health insurance.

Portability

Group health insurance is generally tied to employment. When an employee leaves the company, their employer-sponsored coverage typically ends, although they may have options such as Consolidated Omnibus Budget Reconciliation Act (COBRA) depending on their circumstances.

With a CHOICE Arrangement, the individual health insurance policy belongs to the employee, not the employer. If the employee leaves the company, they can keep their individual coverage as long as they continue paying their monthly premium, although the employer contribution ends.

Benefit administration

Both employee benefits require administration and compliance, but the responsibilities are different. Group health plans involve complex tasks such as plan selection, annual renewals, employee enrollment, eligibility administration, carrier coordination, and ongoing compliance. A self-funded plan can add responsibilities such as claims and plan management.

A CHOICE Arrangement shifts the employer's focus to contribution strategy, employee eligibility, compliance, and benefit administration. Employees handle their individual plan selection, while employers can partner with a full-service administrator, like Remodel Health, to handle implementation, employee communication, enrollment support, compliance, and ongoing administration.

Tax benefits

Both group health insurance and CHOICE Arrangements can provide tax advantages when structured and administered properly.

Employer contributions to a CHOICE Arrangement are tax-deductible for the employer and tax-free to eligible employees. Traditional employer-sponsored group health benefits also have tax advantages. For example, employer contributions toward premiums are tax-deductible, while employee contributions are often taken as pre-tax deductions for those with off-exchange plans.

Although they offer similar tax benefits, a CHOICE Arrangement tends to offer greater flexibility and affordability for employers and employees.

ACA compliance

Both group health insurance and a properly designed CHOICE Arrangement can satisfy the Affordable Care Act’s (ACA) employer shared responsibility requirements for applicable large employers (ALEs).

A CHOICE Arrangement must meet applicable affordability and coverage requirements. Under federal rules, ALEs must offer an affordable CHOICE Arrangement to at least 95% of their full-time employees and their dependents. Employees’ individual plans provide minimum essential coverage (MEC) and minimum value.

Because affordability and compliance requirements can be complicated, employers should work with an administrator when designing a CHOICE Arrangement to avoid ACA employer mandate penalties.

CHOICE Arrangement vs. group health plans

The chart below compares CHOICE Arrangements and group plans side by side.

Is a CHOICE Arrangement better than group health insurance?

A traditional group health plan may still make sense for organizations that are satisfied with their current plan, have low renewal rates, or prefer a standardized, employer-selected benefit.

However, a CHOICE Arrangement may be a better option if an employer wants to:

• Establish a more predictable health benefits budget
• Give employees greater control over their health insurance
• Provide benefits to employees in multiple states
• Move away from the annual group plan renewal cycle
• Offer personalized coverage without selecting a single group plan for everyone
• Create a defined contribution strategy that can scale with the organization

The right decision depends on workforce demographics, employee locations, budget, individual insurance markets, and the organization's long-term benefits strategy.

Choose Remodel Health for your CHOICE Arrangement

Moving from a traditional group health plan to a CHOICE Arrangement can be a significant benefits transformation. The right strategy requires more than selecting a contribution amount — it requires the right plan design, compliance support, employee education, enrollment support, and ongoing administration.

That’s where we come in. As the nation’s largest CHOICE Arrangement administrator, Remodel Health can help employers implement and manage their benefits year-round.

With Remodel Health’s full-service ClearChoice benefits model, you get:

• CHOICE Arrangement plan design. Develop a contribution strategy based on your budget, workforce demographics, employee classes, and geographic footprint.
• Implementation and launch. Work with a dedicated launch team to coordinate the transition from your existing benefits strategy.
• Compliance. Get support with federal government regulations, such as required notices, reporting, plan documentation, and other ongoing compliance responsibilities.
• Employee education. Give employees access to education and licensed Benefits Advisors who can help them understand their individual coverage options.
• Individual plan shopping. Help employees compare coverage based on their providers, prescriptions, preferred networks, and healthcare needs.
• Premium payments. Streamline monthly premium payments and reduce the administrative burden on your HR team.
• Ongoing support. Work with a dedicated team throughout the benefits lifecycle, from implementation through renewal.

Conclusion

The best benefits strategy isn't necessarily the most familiar one. It's the one that aligns with your organization's budget, workforce, and long-term goals. While traditional group health insurance has been the default way employers provide health benefits, it isn't the only option. A CHOICE Arrangement, formerly known as ICHRA, gives employers a better way to offer health benefits with greater cost control and employee choice.

Want to find out if a CHOICE Arrangement could work for your business? Book a call with the Remodel Health team today!

References

1. CMS - CHOICE Arrangements: A Guide for Employers