CHOICE Arrangements (ICHRA) for small businesses
Offer health benefits on a budget you set.
A CHOICE Arrangement, the new name for an Individual Coverage HRA (ICHRA), lets your business give employees a tax-free monthly allowance to buy their own health plan. You control the cost; they choose the coverage that fits them.
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Reviewed by a licensed Upper Echelon Health advisor · Updated November 2026
How it works
A defined contribution instead of a group renewal.
Instead of sponsoring one group plan, you set an allowance by employee class. Employees enroll in individual coverage and you reimburse premiums, and optionally other medical costs, up to that amount.
How we help, at no cost to you
- Map your team. Headcount, locations, ages and budget.
- Design the allowance. We help you compare a CHOICE Arrangement against small group plans for your numbers.
- Enroll your employees. We guide each employee through choosing an individual plan.
Why owners choose it
Where a CHOICE Arrangement can make sense.
Predictable costs
You decide the allowance each year, so a bad claims year doesn't drive a big renewal increase.
Any size business
There's no minimum or maximum number of employees, which helps very small teams that struggle to qualify for a group plan.
Employees pick their plan
Each person chooses the network and deductible that fits their life, including drivers who need broader networks.
Tax-free reimbursements
Allowances aren't taxable income to employees, and the business can generally deduct them.
The rules
What to know before you set one up.
Employees must have individual coverage
To be reimbursed, employees (and any family members included) need individual health insurance or Medicare. We help each employee compare and enroll.
One or the other for each class
You can't offer the same class of employees a choice between your group plan and this arrangement. You can offer different benefits to different classes, such as full-time and part-time, or employees in different locations.
Allowances can vary, within limits
Within a class, amounts must be the same, except that they can increase with age and family size.
Give notice ahead of the plan year
Employees generally must receive written notice at least 90 days before the plan year starts. New hires get it by their first day of eligibility.
Affordability affects tax credits
If the allowance makes coverage affordable under federal rules, employees can't also claim Marketplace tax credits. If it doesn't, they may opt out and claim credits instead. Businesses with 50 or more full-time employees also need to meet employer-mandate affordability rules.
Questions
Straight answers.
It is an employer-funded benefit that reimburses employees, tax-free, for individual health insurance premiums and, if the employer allows, other qualified medical expenses, up to a set allowance. It was called an Individual Coverage Health Reimbursement Arrangement (ICHRA) until September 2026.
No. In September 2026, CMS and the Small Business Administration renamed ICHRA the CHOICE Arrangement. The rules did not change, and you may still see both names on paperwork. Separate bills in Congress would write the arrangement into law, but those have not passed.
There's no minimum. Businesses with one employee or hundreds can offer one. Owners who are the only person in the business generally can't use one for themselves.
Not to the same class of employees. You can offer a group plan to one class and a CHOICE Arrangement to another, for example by job type or location.
Our guidance for business owners and employee enrollment support are at no cost to you. Some businesses also use a separate administrator to process reimbursements, and we can explain those options.
Let's find coverage that fits how you work.
Personal guidance from a licensed advisor. No cost to work with us.
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