HR5463-119

What This Bill Does

This bill creates a new type of employer health benefit called a "CHOICE arrangement" (Custom Health Option and Individual Care Expense arrangement). Instead of offering traditional group health insurance, employers can contribute money to an account that employees use to purchase their own individual health insurance on the marketplace or pay for medical care. The bill also provides tax credits to small and medium-sized employers who adopt these arrangements.

Who Benefits and How

Small and medium-sized employers benefit most directly. They receive a tax credit of $100 per month per enrolled employee in the first year and $50 per month in the second year when they establish a CHOICE arrangement. This makes it cheaper for businesses with fewer than 50 employees to provide health benefits without the administrative burden of traditional group plans.

Employees with specific coverage preferences may benefit by gaining more flexibility to choose individual market health plans that better fit their personal needs rather than being limited to their employer's group plan options.

Health insurance companies selling individual market plans benefit from increased enrollment as more employees use employer contributions to purchase individual coverage rather than group coverage.

Who Bears the Burden and How

The federal government (taxpayers) bears the cost through reduced tax revenue from the new employer tax credits for CHOICE arrangements.

Employees who prefer traditional group coverage may face reduced options if their employer switches from a group health plan to a CHOICE arrangement, potentially shifting more decision-making responsibility and risk to employees in navigating the individual insurance market.

Large employers (those with 50+ employees) are explicitly excluded from the tax credit benefits, as the bill defines "eligible employer" as one who is not an "applicable large employer" under the ACA.

Key Provisions

• Creates CHOICE arrangements: Establishes a new type of Health Reimbursement Arrangement (HRA) where employers contribute money employees can use only for individual health insurance premiums or medical care while enrolled in qualifying coverage
• Employer tax credit: Provides eligible small/medium employers a tax credit of $100/month per enrolled employee in year one and $50/month in year two, with inflation adjustments after 2026
• Cafeteria plan exception: Allows employees in CHOICE arrangements to use pre-tax cafeteria plan dollars to purchase Exchange (marketplace) insurance, an exception to current rules
• Nondiscrimination rules: Requires employers to offer CHOICE arrangements on the same terms to all employees within specified classes (full-time, part-time, salaried, etc.) and not offer competing group health plans to those employees
• W-2 reporting: Requires employers to report the total CHOICE arrangement benefit amount on employee W-2 forms
• Effective date: All provisions take effect for plan years and taxable years beginning after December 31, 2025