How does CHOICE Arrangement affordability work, and what is the percentage for 2026?

A CHOICE Arrangement offer is affordable when the employee's cost for the lowest-cost silver plan in their rating area, minus the employer's monthly contribution, falls at or below a percentage of household income set annually by the IRS. For plan years beginning in 2026 that percentage is 9.96%, set in IRS Revenue Procedure 2025-25, up from 9.02% in 2025 and the highest it has ever been. The percentage attaches to the plan year rather than the calendar year, so a plan year that began in late 2025 continues to use 9.02% until it ends. Affordability is therefore a location calculation before it is a contribution calculation, because individual market rates are set by rating area and rating areas are built from counties. Employers do not need to know household income; the W-2, rate of pay and federal poverty level safe harbors may be used instead.

Is there a minimum company size for a CHOICE Arrangement?

No. Employers of any size can offer one, from a single employee up. Applicable large employers, generally those with 50 or more full-time equivalents, must still meet employer shared responsibility requirements, meaning the offer must be affordable and provide minimum value. Smaller employers have no such mandate and can set any contribution amount.

Can I offer different CHOICE Arrangement amounts to different employees?

You can vary the contribution by employee class and, within a class, by age and family size. Permitted classes include full-time, part-time, seasonal, salaried, hourly, employees in a rating area, employees covered by a collective bargaining agreement, and certain combinations. Inside a class the offer must be made on the same terms to everyone, and if a traditional group plan is offered to one class, minimum class size rules apply to classes placed on a CHOICE Arrangement. A class cannot be designed to isolate a single high-cost employee.

Can I run a CHOICE Arrangement alongside a traditional group plan?

Yes. An employer can offer a traditional group plan to one class of employees and a CHOICE Arrangement to another, subject to minimum class size rules. A common structure keeps the group plan for salaried headquarters staff concentrated in one rating area and places field, seasonal or multi-state employees on a CHOICE Arrangement. The same class cannot be offered a choice between the two.

What happens to employees who were receiving a premium tax credit?

An employee covered by a CHOICE Arrangement gives up the premium tax credit for the months the arrangement is offered, whether or not they enroll, unless the offer is unaffordable and they opt out. This is why affordability testing must be run by rating area. For a lower-wage workforce in a market with rich subsidies, a poorly sized contribution can leave employees worse off than no offer at all, while the same workforce in a market with thin subsidies can be clearly better off.

What administrative work does a CHOICE Arrangement create?

Employers owe employees a written notice, generally 90 days before the start of the plan year, describing the arrangement, the amount, and how it interacts with the premium tax credit, with new hires receiving it by their eligibility date. Employers also need a substantiation process confirming employees have and keep qualifying individual coverage for the months reimbursed. Most administrators automate substantiation.

Can benefits be added on top of a CHOICE Arrangement?

Yes. A defined contribution fixes the employer budget but does not by itself make the benefit feel richer to the employee. Layering a zero copay medication formulary, virtual care, behavioral health and musculoskeletal support on top closes that gap, so employees experience more than they had on a prior group plan while the employer spends less. These components are available a la carte, generally do not require a specific carrier or funding structure, and often do not require waiting for a renewal date.

When can an employer start a CHOICE Arrangement?

Individual market plans are generally sold during annual open enrollment, with special enrollment periods for qualifying events. Gaining a new CHOICE Arrangement offer is itself a qualifying event that opens a special enrollment period. Most employers align the arrangement with a January 1 start and allow 60 to 90 days of runway for notice, education and enrollment support.

Renamed September 3, 2026 · Updated September 2026

What is a CHOICE Arrangement (formerly ICHRA), and what would it change for you?

Q: Is a CHOICE Arrangement the same thing as an ICHRA?

Yes. On September 3, 2026, CMS and the Small Business Administration announced that the individual coverage health reimbursement arrangement, or ICHRA, is now officially called the CHOICE Arrangement, short for Custom Health Option and Individual Care Expense Arrangement. This was an agency terminology change rather than an act of Congress. Bills to codify the CHOICE name in federal statute have been introduced several times without becoming law, and the underlying ICHRA regulations still govern unchanged. Existing plan documents remain valid and employers already offering an ICHRA need take no action.

The benefit you knew as an ICHRA has a new federal name. Here's what changed, what didn't, and when it beats a group plan.

Short answer: a CHOICE Arrangement (Custom Health Option and Individual Care Expense Arrangement) lets an employer reimburse employees tax-free for individual health insurance premiums instead of sponsoring a group plan. You set the contribution, so the budget is fixed by definition. On September 3, 2026, CMS and the Small Business Administration adopted CHOICE Arrangement as the federal name for what was called an ICHRA. That was an agency terminology change, not an act of Congress. The underlying regulations are unchanged, and existing plan documents stay valid.

START HERE

What is a CHOICE Arrangement (formerly ICHRA)?

It's a plan design, not a product you buy. You fund a fixed monthly dollar amount per employee, tax-free. Your people use it to buy their own individual coverage. No group plan, no renewal letter, and no single network you have to pick for everyone.

Four moving parts. That's the whole mechanism.

01 · YOU DECIDE

You set the contribution

A fixed monthly dollar amount per employee. It can vary by age and family size within the rules.

02 · THEY DECIDE

Employees buy their own plan

On or off the individual market, in their own rating area, with their own network and their own doctors.

03 · YOU SET SCOPE

You reimburse, tax-free

Premiums, and qualified out-of-pocket medical expenses if you allow it. No payroll tax, no income tax to the employee.

04 · VERIFIED BY THE PLAN

Employees substantiate

Proof they bought and kept qualifying coverage for the months reimbursed. Usually automated by the administrator.

The part that changes the CFO conversation

There is no renewal.
Your cost next year is the number you chose, not the number a carrier sends you in October.
Trend risk moves off your budget.

That's the entire pitch, and it's a real one.

WHAT CHANGED

Did the rules change when ICHRA became a CHOICE Arrangement?

No. Only the federal name changed. A lot of coverage of the rename gets this wrong, so it's worth being precise.

Did Congress pass a law?

Bills to write the CHOICE name into statute have been introduced several times and none became law. This was an administrative rebrand by CMS and the SBA.

Do the rules change?

The ICHRA final rules still govern. Classes, affordability, notice and substantiation are exactly the same as they were.

Do I need new plan documents?

Existing documents remain valid. Many will still say ICHRA, and that's fine. Nothing needs restating.

BOTH

Which name should I use?

Both will circulate for a while. Carrier forms, IRS guidance and plan documents still say ICHRA in plenty of places.

WORTH KNOWING

Is anything at risk?

A name adopted by agency action can be changed by agency action. The benefit itself rests on the regulations, not the label.

WHEN IT WINS

When does a CHOICE Arrangement beat a group plan?

Anyone who tells you it's always the answer is selling. Here's the honest split.

IT TENDS TO WIN WHEN

Your workforce spans several rating areas or states
Turnover makes group participation minimums hard to hold
The census is old enough that group age rating is punishing
You want a fixed budget number instead of a renewal negotiation
You have a large part-time or variable-hour population
You offer nothing today and want to start offering something

IT TENDS TO LOSE WHEN

The local individual market is thin, with one or two carriers
Employees strongly value one familiar network and a single card
Your own claims experience is favorable enough that self-insuring would be cheaper
Leadership isn't ready to explain a shift from "our plan" to "your plan, our money"
Nobody internally owns the affordability testing and notice work
Your workforce is concentrated in one area with a strong group market

What's in it for you, and for your people

How do I give my people more and still spend less?

A CHOICE Arrangement (formerly ICHRA) fixes your budget, because you set the contribution. It doesn't, on its own, make the benefit feel richer to the person using it.

These aren't perks you buy with the savings. They're a cost lever in their own right. Care that happens sooner, closer and at $0 to the member doesn't turn into an ER visit, a surgery, or three weeks of somebody not at work. What the structure frees up is how you fund them without touching budget.

What your people get	What it costs them	What it prevents
2,400+ medication formulary Generics, OTC, brand and specialty. The list includes medications retailing for up to $1,900 / month, with no cap on coverage. Whole household, not just the employee	$0	The refill they skipped because of cost, which becomes an admission
Telehealth and virtual urgent care No per-member visit cap, subject to clinical appropriateness. Includes medications prescribed from the visit	$0	The ER visit, and the half-day off work that comes with it
Behavioral and mental health Licensed clinicians. Not coaches, not chatbots. No per-member session cap to ration against, subject to clinical appropriateness	$0	Medical claims, absence, and the resignation you didn't see coming
Pain reduction and musculoskeletal care Physical therapy at home. Back, neck, joint, post-surgical and pelvic health, without the clinic commute or the time off	$0	The surgery, and the weeks of recovery around it
Cardiometabolic, diabetes and blood pressure support	$0	The cardiac event. A generic costs dollars. An admission does not
Women's health	$0	Care deferred on a high deductible, which presents later and costlier
Wellbeing and navigation resources	$0	The wrong site of care, at several multiples of the right one
Accident protection Pays a set amount per covered event. Not major medical, does not replace a health plan	Varies	The deductible that turns an accident into a household crisis

Every component is available a la carte. You take what fits your people and leave the rest. Nothing here requires a specific carrier, a specific funding structure, or waiting for your renewal.

What else is my team paying for out of pocket?

Health isn't the only line squeezing your people. The same program carries member discounts on what households reach for most, so the benefit keeps working on the days nobody is sick.

Category	What it covers
Legal	Wills, landlord and tenant matters, family law, consultations and document review
Identity theft protection	Monitoring, alerts and restoration support when something goes wrong
Cyber protection	Device and household-level protection, breach response
Caregiver and dependent care support	Help for the employee carrying a parent, a child, or both at once
Pet care	Veterinary and routine pet expenses
Everyday household services	Commonly used consumer and household categories, and more

These are membership and discount programs. They are not insurance.

What do I get out of it?

The cost math is the headline. It isn't the whole return.

What changes for you	Why it happens
Lower plan cost	Savings come from unit price, contract terms and where care is delivered. Not from cutting what anyone is entitled to
Fewer days lost	Physical therapy at home and $0 virtual visits remove the two biggest reasons care gets postponed: the commute and the copay. Postponed care is what turns a day into a week
Easier retention	A household filling maintenance prescriptions at $0 and reaching a licensed therapist without a waitlist is a household that notices what it would be giving up
Easier attraction	You can describe the benefit in one sentence a candidate understands. "Your prescriptions are free, for your whole family" lands harder than a deductible number
Less financial stress at work	Legal trouble, an identity breach and a sick parent all show up at the office whether or not anyone mentions them. Giving people somewhere to take those is cheap, and it shows
Budget certainty	The program is funded out of savings it generates, so there's no new line item to defend in next year's budget

Why employers work with us

No layoffs. No cuts to benefits. No disruption to your people, your systems or your processes. $0 upfront.

The program pays for itself out of the savings it generates, and savings are realized monthly against your own statements. Budget freed on day 1, typically 15 to 25% of plan cost, reaching 20 to 30% with the full structure. The ranges are not additive, and results depend on your census, claims history and enrollment.

99% of the brokers we talk to have never had visibility to our programs. They sit outside their commissioned channels. That isn't anyone's failing. The systems that surface options only surface what's already inside them.

Affordability

How do I know if my health plan is compliant?

Quick reminder of the plan design. You fund a fixed monthly dollar amount per employee, tax-free. Your people buy their own individual coverage with it. There's one compliance test that decides whether the design holds up, and it runs on geography before it runs on your contribution.

Your plan is compliant on affordability when the employee's cost for the lowest-cost Silver plan in their rating area, minus your monthly contribution, falls at or below a percentage of household income the IRS sets each year.

The number for 2026

9.96% for plan years beginning in 2026. Set by the IRS in Revenue Procedure 2025-25.
Up from 9.02% in 2025, and the highest it has ever been.
Higher works in your favor. Employees can be asked to carry a larger share of income before the plan fails the test, so a smaller contribution can still clear it.
Timing trap: it attaches to the plan year, not the calendar year. A plan year that started in late 2025 keeps 9.02% until it ends.

What happens if I get it wrong?

Your employees lose an option. A compliant plan design removes their premium tax credit eligibility, whether or not they enroll.
At 50 or more full-time equivalents, a plan that fails the test creates penalty exposure when someone goes to the exchange and receives a credit.
Rating areas are built from counties. If your people are spread out, run the test by location, not once for the company.
Model it before you commit. For a lower-wage workforce in a market with rich subsidies, a poorly sized contribution can leave people worse off than no plan at all.

Run your own county in 30 seconds

The free lookup returns your rating area, the lowest-cost Silver premium by age, how many carriers compete there and the approved 2026 rate change. Every county, all 50 states plus DC. No login, no form, nothing transmitted. Open the county affordability lookup

Questions

What else should you know before you decide?

Classes, affordability, tax credits and timing.

Is a CHOICE Arrangement the same thing as an ICHRA?

Is there a minimum company size for an ICHRA or CHOICE Arrangement?

Can I offer different amounts to different employees?

Can I run a CHOICE Arrangement alongside a group plan?

What happens to employees who were getting a premium tax credit?

What administrative work does this create?

Can I add benefits on top of a CHOICE Arrangement?

When can we start one?

Fifteen minutes, your current rate

If your health benefit budget stopped moving every October, what would you do with the certainty?

Enough to find out whether a CHOICE Arrangement, a level funded plan or a shelf-rated plan fits your people best.

See what your budget frees up

Methodology and important disclosures

What this page is. General education about a federal benefit structure. It is not a quote, an offer of coverage, tax or legal advice, or a recommendation about what is suitable for your organization. Affordability, class design and notice obligations depend on facts this page does not know. Confirm your specific situation with your own counsel and tax advisor.

Terminology. CMS and the SBA adopted CHOICE Arrangement as the federal name for the individual coverage health reimbursement arrangement on September 3, 2026. That was an agency terminology change, not a statutory one, and the underlying ICHRA regulations are unchanged.

Program components. Bundled care components described here are available a la carte and vary by employer, state, group size and eligibility. Availability, covered services, visit terms and any utilization or clinical-appropriateness limits are set by each program and its published terms, not by this page. Where visits are described as unlimited, that reflects no per-member visit cap under the program terms and remains subject to clinical appropriateness and the program's own conditions of use. The medication count reflects the current formulary and is subject to change.

Member discounts. Legal, identity theft, cyber, caregiver and dependent care, pet care and household service benefits are discount and membership programs, not insurance. They do not pay providers, they do not coordinate with a health plan, and availability varies by state and by program.

Accident and supplemental products. Accident protection pays a fixed amount based on a covered event rather than on medical cost. It is not major medical coverage, is not minimum essential coverage, and is not a substitute for comprehensive health insurance.

Savings, retention and absenteeism. All savings figures are stated as ranges and reflect outcomes observed across engagements, rounded. They are not guarantees and not projections of your results. Savings from different levers are not additive. Statements about retention, attraction, absenteeism and workplace outcomes describe the mechanisms by which these programs are designed to work. They are not quantified performance claims and no specific result is promised.

Insurance placement. Any insured products referenced are marketed and offered through licensed agents in states where licensed. Save with Benefits provides education and program design. Last reviewed September 2026.