What is the CHOICE Arrangement, and what does it mean for ICHRA?

Legislative momentum is building to secure personalized, defined-contribution health benefits for Americans. On December 17, 2025, the U.S. House of Representatives passed its second bill in 2025, advancing legislation to codify the individual coverage health reimbursement arrangement (ICHRA). This signals that Congress increasingly views this benefit as a permanent part of the employer health landscape.

The Lower Health Care Premiums for All Americans Act includes a provision that would codify and rename the ICHRA, creating the custom health option and individual care expense arrangement (CHOICE Arrangement). 

H.R. 6703 retains most of the policy framework from the earlier draft, which was cut from H.R. 1, the “One Big Beautiful Bill Act” (OBBBA), and expands on the ICHRA final rules. While this bill hasn’t become law yet, it’s important to look at the enhancements it might provide the ICHRA.

This legislative interest in the ICHRA as a solution to stabilizing the individual market and lowering healthcare costs for Americans shows that the health benefit is gaining momentum in the market.

In this article, we’ll explore:

• How the CHOICE Arrangement compares to the ICHRA
• Why this potential change matters for brokers and employers
• What the next steps are for the bill to become law

Organizations can take advantage of an ICHRA today. Learn all about the ICHRA in our ultimate guide.

How does the CHOICE Arrangement compare to ICHRA?

The ICHRA is an employer-funded health benefit that enables employers to provide their employees with a tax-free contribution toward individual health insurance premiums and potentially other out-of-pocket medical expenses.

President Donald Trump issued an executive order in 2017, aiming to expand HRAs, which ultimately culminated in the 2019 ICHRA final rules issued by the Departments of the Treasury, Labor, and Health and Human Services. These final rules and earlier regulations, as outlined in IRS Notice 2002-45, currently govern the ICHRA benefit.

So, how do these final rules differ from the changes for the CHOICE Arrangement in the Lower Health Care Premiums for All Americans Act bill?

H.R. 6703 would codify ICHRA as the CHOICE Arrangement

The most important change that would occur should the bill become law is the codification of the ICHRA in federal statute under the CHOICE Arrangement name¹. This would preserve the core structure of the ICHRA in federal law, reducing concerns around future presidential administrations making unilateral regulatory changes to the benefit.

While the ICHRA is secure as is, having survived two presidential administrations so far, this would provide peace of mind to those concerned about the long-term viability of the benefit. It also shows a serious commitment to the success of the ICHRA from federal legislators.

Here’s what the bill would add to Section 9815(b) of the Internal Revenue Code of 1986:

• Directly adds the CHOICE Arrangement as an exception under self-insured group health plans: “For the purposes of this subchapter, a custom health option and individual care expense arrangement shall be treated as meeting the requirements of section 9802 and sections 2704, 2711, 2713, and 2715 of title XXVII of the Public Health Service Act.”
• Defines the CHOICE arrangement as a health reimbursement arrangement, which is an employer-provided group health plan "funded solely by employer contributions to provide payments or reimbursements for medical care subject to a maximum fixed dollar amount for a period, under which such payments or reimbursements may only be made for medical care provided during periods during which the individual is covered under individual health insurance coverage (other than coverage that consists solely of excepted benefits), or under part A and B of title XVIII of the Social Security Act or part C of such title.”
• Codifies existing ICHRA rules, including nondiscrimination requirements, substantiation requirements, and notice requirements.
• Outlines the CHOICE Arrangement employee classes and reaffirms that an arrangement won’t fail to be treated as provided on the same terms within an employee class because of family status contributions (such as more for employees with dependents) or age (on a 3:1 ratio from the youngest to oldest employee).

In addition to codifying ICHRA, the bill includes proposed enhancements to benefit.

Reduces the notification period for ICHRA

Under the 2019 ICHRA final rules, employers should generally provide a notice to employees about the ICHRA and their rights and obligations at least 90 days before the benefit start date².

The new bill would shorten this requirement to 60 days. It also adds exceptions for new hires and new employers established fewer than 120 days before the beginning of the plan year.

These changes would present easier onboarding timelines and better alignment with real-world hiring and benefit plan launches. It would also align with the 60-day special enrollment period (SEP) that employees would become eligible for after the offer of the ICHRA benefit.

Tax parity improvements

Another major change to the ICHRA as the CHOICE Arrangement is how it relates to taxes, namely pre-tax deductions and W-2 reporting.

First, let’s examine the potential changes to pre-tax deductions through a Section 125 cafeteria plan. Currently, employees with an ICHRA can only make pre-tax deductions through a Section 125 plan for their share of their individual health insurance premiums for off-exchange plans. If an employee’s off-exchange insurance premium is more than their ICHRA contribution, they can pay for the rest through salary reductions.

H.R. 6703 would create a new exception to the rule, which currently prohibits pre-tax cafeteria plan deductions for on-exchange coverage. This would allow employees with on-exchange individual plans and a CHOICE Arrangement to use pre-tax deductions for their share of their premiums.

This creates a better employee experience for those with on-exchange plans, who must currently wait for reimbursement for their premiums and pay their portion of the cost upfront.

Section 103 of H.R. 6703 states, “Section 125(f)(3) of [the Internal Revenue Code] is amended by adding at the end the following new subparagraph: (C), exception for participants in choice arrangement. Subparagraph (A) shall not apply in the case of an employee participating in a custom health option and individual care expense arrangement (within the meaning of section 9815(b)(2)) offered by the employee’s employer.”

The bill would also establish required Form W-2 reporting for the CHOICE Arrangement. H.R. 6703 would amend Code §6051. Currently, the final rules don’t require employers to report ICHRA contributions on employees’ W-2s. This change would bring the CHOICE Arrangement more in line with reporting requirements for the qualified small employer HRA (QSEHRA), which currently requires W-2 reporting. In both cases, this is informational reporting only, as contributions are tax-free.

Group plan coordination for small businesses

The ICHRA final rules allow organizations to offer both the ICHRA and a traditional group health insurance plan. However, employers can’t offer these benefits to the same class of employees or give them a choice between the two benefits. This means an employer can offer an ICHRA to some classes, like hourly employees, while offering a group plan to another class, like salaried workers.

However, H.R. 6703 could allow small employers to offer both a small group plan and an ICHRA to the same classes of employees. This could also provide employers with the structure to give employees the flexibility to choose which benefit they want to participate in.

Here’s what the bill says: “In the case of an employer who offers a group health plan provided through health insurance coverage in the small group market (that is subject to section 2701 of the Public Health Service Act) to all employees within such specified class, subclause (II) shall not apply to such group health plan.”

In short, the CHOICE Arrangement preserves the ICHRA framework while strengthening its statutory footing and administrative flexibility.

What this bill reaffirms about ICHRA

The House of Representatives passed its second bill that includes the CHOICE Arrangement in 2025, by a vote of 216-211. This shows that Congress is comfortable with defined-contribution health benefits and the existing 2019 ICHRA final rules³. They view ICHRA as an essential component of health policy and individual market integration, particularly with the expiration of enhanced premium tax credits.

With the ICHRA surviving two presidential administrations and getting more attention in 2025 and beyond, employers and brokers can plan around ICHRA with more confidence in the benefit’s staying power.

What this means for brokers and employers

The potential changes to ICHRA in this bill represent a major step forward in health benefit flexibility. This is the second time in 2025 and the third time in total that Congress has proposed legislation to codify ICHRA. This shows legislators’ long-term confidence in the future of the benefit.

Those who’ve opted for ICHRA or who are weighing their options would gain:

• Long-term confidence in the future of ICHRA and CHOICE Arrangement plans
• New features that support an enhanced employee experience

The CHOICE Arrangement provisions support a continued shift toward portable, consumer-driven health coverage.

What is the current status of the CHOICE Arrangement?

The Lower Health Care Premiums for All Americans Act is making its way through Congress. After the bill passed in the House of Representatives on December 17, 2025, it headed to the Senate for consideration. The Senate took possession of the bill on December 18, 2025, but adjourned for the holidays until January 6, 2026. As of January 8, they haven’t taken up a vote on the bill.

If the Senate passes the bill as-is, it could become law in early 2026. However, the Senate might make changes to the bill or reject it entirely. The bill is wider in scope than just codifying ICHRA, and many legislators have expressed opposition to those other, more controversial provisions. Should a version of the bill pass, it would then head to the White House for President Trump’s signature after reconciling the differences between the two versions.

Remodel Health is closely monitoring the progress of this legislation. Even though the bill hasn’t passed, it’s a good idea to start preparing for the potential changes. Consider whether a CHOICE Arrangement or ICHRA could provide more flexibility and cost control for your organization or clients.

If you want to learn more about ICHRA and how it can benefit your book or business or organization, Remodel Health can help. We’re the ICHRA administrators that broker partners and employers trust. Learn more about our ICHRA+ administration solution with white-glove customer service.

References

1. Congress.gov- - H.R. 6703 - Lower Health Care Premiums for All Americans Act
2. “ICHRA Final Rules” - Health Reimbursement Arrangements and Other Account-Based Group Health Plans
3. Politico - House Republicans pass health care plan without re-upping insurance subsidies