CHOICE Arrangements – A Name Change, Not a Rule Change

Because of a recent announcement of a branding change by the Centers for Medicare and Medicare Services (CMS) and the Small Business Administration (SBA), employers may start seeing the term “CHOICE arrangement” used instead of ICHRA (Individual Coverage Health Reimbursement Arrangement).

For now, this is simply a branding change.  The underlying legal and compliance framework has not changed, and there is nothing employers need to do differently today.  Employers can continue designing, offering, and administering these arrangements under existing ICHRA rules.  

What is a CHOICE Arrangement? 

CHOICE stands for Custom Health Option and Individual Care Expense arrangement.  The underlying benefit design has not changed.  Employers may still provide a defined, tax-advantaged contribution that employees can use to purchase individual health insurance coverage and eligible medical expenses. In practice, CHOICE Arrangements and ICHRAs are currently the same benefit structure.  

Why Nothing has Changed from a Compliance Perspective 

While CMS and SBA have adopted the CHOICE terminology, the agencies did not announce new statutory or regulatory requirements. The rebrand simply changes how the federal government is referring to the arrangement.  

It is worth noting that Congress previously considered legislation that would have codified the CHOICE name and made additional substantive changes to the ICHRA framework.  Those provisions were ultimately removed before enactment and never became law.  

Today, ICHRAs continue to operate under the existing 2019 tri-agency regulations issued by the Departments of Treasury, Labor, and Health and Human Services (the Departments). Those regulations remain unchanged and continue to use the term Individual Coverage HRA (ICHRA).  

What This Means for Employers 

• No action is required.  Continue following the current ICHRA requirements, including eligibility class rules, notice obligations, substantiation requirements, and nondiscrimination standards.   

• Treat CHOICE as another name for an ICHRA.  CMS, SBA, carriers, vendors, consultants, or industry groups may refer to the arrangement as either ICHRA or a CHOICE Arrangement.  

• The name changed; the rules did not.  Employers should continue operating under the existing ICHRA framework unless and until future legislation or regulations create substantive changes.  

Looking Ahead 

Although no legislative changes have taken effect, employers should continue monitoring potential regulatory activity. Because ICHRAs are governed by agency regulations rather than federal statute, the Departments have authority to modify the rules through future rulemaking.  Additional proposed or final regulations could be issued in the coming months.  

Importantly, even if new regulations are released, they would likely include a delayed applicability date to give employers, carriers, and administrators sufficient time to prepare.  Any future changes would therefore be unlikely to affect current plan operations. 

If future legislation or regulations result in substantive changes to ICHRA requirements, OneDigital will provide guidance on the changes, applicable effective dates, and any compliance steps employers should take.  Until then, employers can view CHOICE as a new label for an existing arrangement, not a new benefit structure or compliance framework.