Business leaders and policymakers have been sounding the alarm for years: The employer-sponsored health insurance model is unsustainable. But with the cost of group health insurance premiums up 25% in five years, a fix may be in the works.
Introduced during the first Trump administration, individual coverage Health Reimbursement Arrangements continued to receive federal support through the Biden years. Now, if key provisions under consideration in the “One Big Beautiful Bill” are passed, Congress will expand ICHRAs (renaming them “CHOICE” arrangements) and transform them into a compelling alternative to traditional group health insurance.
Just as we saw a transition away from employer pension plans to 401(k) plans for retirement, many believe we’re starting to see a comparable shift in the way health benefits work. As an alternative to the costly group health insurance model, ICHRA allows companies to make tax-preferred contributions toward the premiums of health plans employees select for themselves and their families in the open market. Plans must meet federal minimum coverage standards to be qualified.
Like the 401(K), ICHRA moves employers from providing defined benefits to defined contributions. It also enables employees to select from a broad range of individual and family plans — compared to the one to three plans commonly offered by employers. In some states, premiums for self-purchased individual coverage can run 30% to 50% less than group coverage on a per-person basis, making ICHRA very compelling in those markets.
However, a 2024 poll found 55% of small to mid-sized employers are unfamiliar with ICHRA. That may soon change given that proposed new rules in the “One Big Beautiful Bill” are likely to make ICHRA more flexible, accessible, and valuable. The new CHOICE arrangement (which stands for “Custom Health Option and Individual Care Expense”) would allow employees, like employers, to use pre-tax dollars toward their monthly premiums. It would also give small businesses with 50 or fewer employees a new and valuable two-year tax credit when they adopt the CHOICE model.
If broadly adopted, the implications of the CHOICE arrangement would be profound. Employers could shift from being health plan sponsors to facilitators, empowering employees to shop around while subsidizing premiums. This not only reduces administrative complexity but also aligns with broader trends toward personalization and consumer choice in healthcare.
While Congress debates these changes, many employers are already acting. Prior to these new provisions being introduced, ICHRA adoption was projected to increase by 255% in 2025.
If we were advising business owners and benefit managers today, we’d say: Encourage your elected representatives to support CHOICE, but don’t wait to assess your business needs and current benefit costs. For employers facing steep health plan rate increases, ICHRA can serve as a temporary or long-term solution to stabilize expenses while maintaining compliance with the Affordable Care Act.
Make sure to review your local insurance market before making the leap to ICHRA, as insurance costs can vary by state and county. Individual market premiums can be significantly more affordable than group rates, but that’s not true everywhere. Employers should evaluate their local market conditions to understand whether ICHRA is a good option for them.
Finally, it’s important to choose the right ICHRA administrator, as managing ICHRA benefits can be a hurdle. Some third-party administrators offer end-to-end solutions, handling everything from premium contributions to plan shopping and enrollment, with ongoing employee support.
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The new energy behind ICHRA and CHOICE is encouraging. Doing nothing would only lead to an increasing number of employers cutting health benefits entirely, leaving employees and their dependents unsupported.
As the “One Big Beautiful Bill” moves toward the president’s desk for approval, it signals a shift in how policymakers and businesses think about health benefits. For businesses seeking cost control, flexibility, and employee satisfaction, ICHRA (CHOICE) could be the future — and that future may arrive sooner than many expected.
Bobby Jindal is a former Republican governor of Louisiana. Fran Soistman is the CEO of eHealth, a leading online insurance marketplace.