The Choice Arrangement Act creates a new type of employer health benefit called a "custom health option and individual care expense arrangement" that allows employers to reimburse employees for individual health insurance coverage purchased on the private market or through Medicare, rather than offering traditional group health plans. These arrangements must be funded entirely by employers, offered equally to all employees in defined classes (such as full-time or part-time workers), and capped at fixed annual dollar amounts that can vary by age and number of dependents. The bill affects employers with fewer than 50 full-time employees (those not classified as "applicable large employers") and their workers who enroll in individual or Medicare coverage. To incentivize adoption, the legislation provides employers with a tax credit of $100 per employee per month during the first year they offer such arrangements and $50 per employee per month during the second year, with the credit amount adjusted for inflation after 2026. The changes take effect for plan years beginning after December 31, 2025.
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