On May 14, 2025, the U.S. House Ways and Means Committee advanced the One Big Beautiful Bill Act1. This sets in motion one of the most comprehensive tax and health benefits overhauls in recent years. While the bill contains proposed provisions across various policy issues, from education to energy, it also delivers significant changes for health benefits.
Among these changes is a rebranding and expansion of individual coverage health reimbursement arrangements (ICHRAs).
At Remodel Health, we’re closely monitoring these developments. Here’s what the bill proposes for ICHRA and what it means for employers, employees, and insurance professionals.
In this blog post, you’ll learn:
- How the CHOICE Arrangement differs from the ICHRA
- What changes the bill proposes for HSAs and Medicaid
- What’s next for the bill
See how employers designed their ICHRA benefits in 2024 with our report.
ICHRA becomes the CHOICE Arrangement
One of the bill’s most significant changes to health benefits is the formal codification of ICHRA into law. This includes 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’s changing with ICHRA if it becomes 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 enshrine ICHRA in federal statute as the CHOICE Arrangement. This ensures long-term stability regardless of future presidential administrations.
- A new tax credit for small businesses. To encourage ICHRA adoption, the bill proposes 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 is 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 allow 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 offer both a group health plan and an ICHRA to the same class if they’re a small business (non-ALEs).
- There’s the potential for new employee classes in the future. The new bill gives the Secretary of Health and Human Services the ability to add new employee classes through regulation.
- It shortens 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.
The changes made to ICHRA would apply to plan years beginning on January 1, 2026.
What these changes to ICHRA mean for employers and insurance professionals
For employers and brokers, these potential changes represent a huge step forward in health benefit flexibility.
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
- Potential incentives for offering the benefit, depending on the business size
The CHOICE Arrangement provisions support a continued shift toward portable, consumer-driven health coverage.
What other health benefits changes does the proposed bill include?
The bill encompasses more than changes to the ICHRA.
Other health benefits-related changes include2:
- Health savings account (HSA) expansions. The bill includes various proposals aimed at expanding HSAs. It would allow those entitled to Medicare Part A to contribute to an HSA if they’re enrolled in a high deductible health plan (HDHP). It would also allow those with HDHPs to enroll in direct primary care plans and use HSA funds to pay for those services. Another change would be which plans individuals can have and contribute to an HSA. Currently, bronze and catastrophic plans don’t meet the HDHP requirements. Under the proposed changes, all bronze and catastrophic plans on the public Marketplace would become eligible plans for HSAs. The bill would also allow spouses to make catch-up HSA contributions to the same HSA account.
- 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 bill would restrict subsidy eligibility to citizens, Lawful Permanent Residents, certain Cuban immigrants, and those with a Compact of Free Association.
- Eliminating 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. This proposal would eliminate tax credits for those individuals using the low-income SEP.
- Changes to Medicaid. The bill would implement many changes to Medicaid, including ending the open-ended federal matching for states and implementing work requirements. Starting January 1, 2029, individuals would be required to prove that they’re working, actively seeking employment, or participating in a job training program to receive Medicaid. States would also gain the ability to cut optional Medicaid benefits like dental and vision coverage. The Congressional Budget Office is estimating that as many as 7.6 million people could become uninsured.
Conclusion
The One Big Beautiful Bill Act is still making its way through committees and isn’t a done deal. The House Budget Committee, which consolidates the various changes and packages into a single bill, voted against the bill on May 16, 20253. This means the bill needs further changes before it will move to the House Rules Committee and the House of Representatives.
Republican leaders in the House have indicated that they hope to bring it to a vote before Memorial Day. To become law, it would need to pass a floor vote in the House and the Senate. If the Senate makes any changes and passes the bill, it would need to go to committee once again to reconcile any differences before another vote takes place. From there, it would need President Trump’s signature.
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 could provide more flexibility and cost control for your organization or clients.
Whether you already offer an ICHRA or are just getting started, we’re here to help you navigate these changes and maximize the impact for your team.
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
Learn how Remodel Health’s ICHRA+ product is built for the needs of ALEs