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.
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:
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:
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.
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.
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:
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.
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.
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.
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.
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.
The chart below compares CHOICE Arrangements and group plans side by side.
|
Feature |
CHOICE Arrangement |
Group health insurance |
|
Plan type |
Employer-funded defined contribution benefit |
Employer-sponsored health insurance policy |
|
Employee choice |
Employees select their own individual health insurance plans on ACA exchanges or private marketplaces |
Employer selects the available group plan options |
|
Cost predictability |
Employer sets the contribution amount in advance |
Health plan costs can change at renewal or fluctuate with claims for self-funded policies |
|
Participation requirements |
No traditional group-plan participation requirement |
Participation requirements may apply depending on the carrier and plan. But in many cases, employers must meet a 70% participation rate. |
|
Portability |
Employees own their individual health plans, but the employer contribution ends when employment ends |
Coverage ends when employment ends |
|
Administrative simplicity |
Employers can simplify benefit design and ongoing administrative tasks with a CHOICE Arrangement administrator, like Remodel Health |
Group health insurance options require enrollment support, renewal, and carrier administration that can be time-consuming and complex. |
|
Employee plan options |
Employees can choose from qualifying individual plans available in their market |
Employees choose from employer-selected group plan options |
|
Tax treatment |
Employer contributions are tax-deductible and tax-free to eligible employees |
Employer contributions are tax-deductible, and employee contributions are pre-tax |
|
ACA compliance for ALEs |
Can satisfy the employer mandate when designed to meet applicable affordability and coverage requirements according to IRS guidance |
Can satisfy the employer mandate when structured correctly |
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:
The right decision depends on workforce demographics, employee locations, budget, individual insurance markets, and the organization's long-term benefits strategy.
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:
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!
1. CMS - CHOICE Arrangements: A Guide for Employers