How does an individual coverage health reimbursement arrangement work?

An individual coverage health reimbursement arrangement (ICHRA), now known as the CHOICE Arrangement, is an employer-funded benefit that lets employers provide tax-free contributions toward employees’ individual health plan premiums. Employers set contribution amounts based on their healthcare budget, eligible employees select qualifying individual coverage, and use their employer-provided contributions to cover the cost.

Who is eligible for an ICHRA?

Employers of any size can offer an ICHRA to eligible employees. Employees must have qualifying individual health insurance coverage to participate. For greater flexibility, employers can vary contribution amounts by job-based employee classes, age, or family status.

Can employees choose their own health insurance policies with an ICHRA?

Yes. Employees choose individual health insurance plans that fit their healthcare needs, preferred provider networks, and budget. To use the benefit, they must enroll in qualifying coverage, such as ACA Marketplace health plans, certain student coverage, and eligible Medicare policies, like Medicare Parts A and B together or Part C.

How are ICHRA premiums paid?

Premium payment arrangements depend on the employer’s benefit administration process. Some organizations provide their employees with tax-free reimbursements, up to their contribution limit, after they pay for their monthly premiums. With Remodel Health, Autopay coordinates funding and automates premium payments directly to insurance carriers on time.

Does an ICHRA satisfy the ACA employer mandate?

An employer can satisfy the Affordable Care Act’s employer mandate for applicable large employers (ALEs) if their group coverage provides MEC, meets minimum value standards, and is affordable. With an ICHRA (now a CHOICE Arrangement), employers only need to offer an affordable contribution to at least 95% of their full-time employees and dependents. Employers should review their ICHRA benefits annually to ensure their contributions meet ACA regulatory requirements.

What is the difference between an HSA and an HRA?

An HSA is a tax-advantaged savings account that employees and employers can contribute to, up to the annual maximum limit. An employer can offer an HSA as part of their company’s benefits package, or an individual can open one on their own. In either case, the individual always owns it and the funds inside — even if they leave their employer’s organization. An HRA is a personalized health benefit that lets employers contribute tax-free money toward employees’ individual health plan premiums. With a CHOICE Arrangement, there are no minimum or maximum contribution limits. HSA funds roll over annually and remain with the employee indefinitely, while unused HRA funds remain with the employer at the end of the plan year or if an employee leaves their company.

Can you use HSA funds for health insurance premiums?

You can’t use your HSA to pay for individual or group health insurance premiums. However, the IRS allows account holders to pay premiums for COBRA coverage, health coverage while receiving unemployment compensation, qualified long-term care insurance, and Medicare Parts A, B, C, and D after age 65. If your employer offers a CHOICE Arrangement, they can design the benefit to allow tax-free payments toward employees’ individual health plan premiums.

Can you have an HSA and an ICHRA at the same time?

Yes. An HSA can pair with an ICHRA, now called the CHOICE Arrangement, if the plan design meets HSA eligibility rules. This means the CHOICE Arrangement must limit reimbursement to employees' health insurance premiums, as well as dental and vision expenses. Alternatively, employers can limit the ICHRA to reimburse out-of-pocket expenses only after employees reach their deductibles. A standard ICHRA can make an employee ineligible for an HSA because it could reimburse all qualified healthcare costs outlined in IRS Publication 502.

What happens to your HSA if you change jobs?

Your HSA stays with you when you leave an employer. You keep the account balance, including any employer contributions deposited, and can continue using the funds for qualified medical expenses. You can contribute to the account at a new job or on your own.

What happens to HSA funds you don't use by the end of the year?

Unlike a health FSA, unused HSA money rolls over automatically from year to year. You don't have to spend the funds by December 31, and you can continue saving or investing eligible funds for future healthcare expenses.

What is the ACA affordability percentage for 2027?

As confirmed in IRS Revenue Procedure 2026-26, the ACA affordability threshold for plan years beginning in 2027 is 10.22%, up from 9.96% in 2026.

How do you calculate ACA affordability for 2027?

Multiply the applicable income or wage measure by 10.22%, depending on the affordability test or safe harbor you’re using. For example, under the Rate of Pay safe harbor, an employee earning $5,000 per month has a monthly affordability limit of $511.

What happens if an employer's health coverage isn't affordable?

An ALE may owe one of two employer shared responsibility payments under Section 4980H if its coverage is unaffordable or fails to meet minimum essential coverage (MEC) or minimum value standards and at least one full-time employee receives a premium tax credit for a Marketplace plan.

Can employers use safe harbors to determine ACA affordability?

Yes. ALEs can use the federal poverty level, rate of pay, or Form W-2 safe harbor to verify affordability for purposes of the employer mandate. These methods help employers determine ACA compliance without knowing employees' actual household income.

How does the 2027 affordability threshold affect a CHOICE Arrangement?

The 10.22% threshold helps determine whether a CHOICE Arrangement, formerly known as an ICHRA, is affordable coverage under the ACA so ALEs can avoid tax penalties. Employers will use their employees’ household income (or a safe harbor) and the lowest-cost silver plan on the local exchange to run the calculation. They must also subtract employees’ ICHRA contributions from the premium.

How do you calculate FTEs for ACA purposes?

For each month, count your full-time employees (those who average at least 30 work hours a week) and add the full-time equivalent represented by your non-full-time employees. To calculate non-full-time FTEs, add their monthly work hours, limit each employee to 120 hours, and divide the total by 120. Then average the monthly totals over 12 months and round the result down to the nearest whole number.

How many FTEs make an organization an ALE?

An employer is generally an ALE if it averaged at least 50 full-time employees, including FTEs, during the previous calendar year.

Do part-time employees count toward the 50-employee ACA threshold?

Yes. Although they don’t work on a full-time basis, you must combine the hours your part-time employees work with those of your full-time employees to determine whether the total reaches the 50-employee ALE threshold.

Do seasonal employees count when calculating ALE status?

Yes, you must include seasonal employees in the calculation, unless you qualify for the seasonal worker exception. To qualify, your workforce must exceed 50 full-time employees (including FTEs) for no more than 120 days during the calendar year, and the employees above the 50-employee threshold during that period are seasonal workers.

What happens if my company becomes an ALE?

If your organization becomes an ALE, it becomes subject to the ACA's employer shared responsibility provisions. This means the employer must offer affordable, minimum-value coverage to at least 95% of its full-time employees and their dependents, or it may owe one of the two employer shared responsibility payments, which can be very costly.

What is the difference between an HMO and a PPO?

The main difference is provider flexibility. With an HMO, you generally have to use in-network providers for non-emergency care. You may also need a referral to see specialists. PPOs generally allow you to see specialists without referrals and provide some coverage for out-of-network care, although you'll usually pay more.

Which health insurance network type is best for individual coverage?

There isn't one network type that is best for everyone. The right choice depends on your preferred doctors and hospitals, how often you see specialists, whether you need out-of-network coverage, and your budget. When comparing individual plans, review the provider network, covered services, premiums, deductibles, and other cost-sharing requirements.

Can employees choose different health insurance networks through a CHOICE Arrangement?

Yes. A CHOICE Arrangement, formerly known as an ICHRA, allows eligible employees to choose individual health insurance coverage that meets their needs, subject to the terms of the employer's arrangement. This means employees can select plans with different network types, such as HMOs, PPOs, EPOs, or POS plans, rather than all employees enrolling in the same group health plan.

What does an ICHRA provider do?

An ICHRA provider helps employers design, implement, and administer their individual coverage health reimbursement arrangement. Depending on the provider, services may include compliance support, employee enrollment assistance, plan selection tools, contribution management, reimbursement administration, payroll system or HRIS integrations, and ongoing customer support.

How do I choose an ICHRA vendor?

During ICHRA vendor selection, consider the level of administrative and compliance support, employee plan-selection and enrollment tools, technology integrations, broker support, customer service, and the provider's experience with businesses similar to yours. Employers should also consider whether they need a software-focused solution or a full-service ICHRA partner.

How much does it cost to administer an ICHRA?

ICHRA administration costs vary by provider and typically depend on factors such as the number of employees, services included, and level of support. Some providers primarily offer technology and automated administration, while others provide additional implementation, benefits advisory, compliance, and employee support services.

Can an employer switch ICHRA providers?

Yes. Employers can transition from one ICHRA provider to another. However, the change requires careful coordination to keep employee, contribution, plan, and reimbursement information accurate. Employers should work with their current and new providers to establish a transition timeline and communicate any changes to employees and brokers.

What are the largest individual health insurance companies?

For the 2026 Affordable Care Act (ACA) Marketplace, KFF identifies UnitedHealthcare, Centene Corporation, Oscar Health, Elevance Health, Molina Healthcare, Cigna Healthcare (exiting the market in 2027), and Kaiser Permanente among the major national participants. KFF reports that they operate in 30, 29, 20, 18, 14, 11, and 10 states, respectively.

Is Blue Cross Blue Shield an individual health insurance carrier?

Blue Cross Blue Shield is a system of independent, locally operated insurance companies rather than one nationwide carrier. Availability, networks, and plan designs vary by the specific Blue Cross Blue Shield company serving your area.

How do I find out which health insurance carriers are available in my area?

Visit HealthCare.gov or your state's health insurance exchange. Enter your location to see the plans and carriers currently available to you. CMS also provides Marketplace data showing insurer service areas by state, county, and ZIP code.

Can employees choose their own health insurance with a CHOICE Arrangement?

Yes. With a CHOICE Arrangement, employees receive employer-funded contributions that they can use toward individual health coverage. Rather than being limited to an employer-selected group plan, employees can select an individual plan that meets the benefit’s requirements and is available in their area.

Do individual health insurance carriers offer the same plans in every state?

No. Carriers can offer different plans, networks, premiums, and benefits by state and county. A carrier may also change its service area from one year to the next. KFF's 2026 Marketplace analysis documents substantial county-level changes in insurer participation.

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