The One Big Beautiful Bill May Bring CHOICE On The Horizon

On May 14^th, 2025, the One Big Beautiful Bill Act was advanced by the U.S. House Ways and Means Committee and on Sunday, May 18^th, the House Budget Committee voted to advance the bill to the House Rules Committee. This would make Individual Coverage Health Reimbursement Arrangements (ICHRAs), Health Savings Accounts (HSAs), Flexible Spending Accounts (FSAs), and Student Loans more generous and easier for employers to offer these tax-advantaged accounts. It also includes updating the paid family and medical leave tax credit rules and impacts to Medicaid and Special Enrollment Periods (SEPs).

Summary of key findings covered in this report:

• The bill proposes changes to solidify ICHRA and give it the new name CHOICE Arrangements and make them more flexible for employers and employees
• The bill proposes to implement a tax credit to incent employers to implement an ICHRA/CHOICE Arrangement
• The bill proposes to expand HSA eligibility and contribution limits and expand eligible expenses for HSA money
• The bill proposes changes that expand other benefit accounts, including Dependent Care, Student Loan Reimbursement, and more

This bill will codify ICHRA into law. An ICHRA allows employers to give their employees a tax-free allowance for individual health insurance premiums. This provides the employer with a cost management alternative to traditional group health insurance while employees get more plan choices. CHOICE being the operative word – this is a rebranding from ICHRA to the Custom Health Option and Individual Care Expense (CHOICE) arrangement, which continues to shift toward portable, consumer-driven health coverage. There is no doubt – defined contribution health benefits may be here to stay!

So, what does it mean by changing ICHRA to CHOICE?

• CHOICE arrangements evolved from the ICHRA, which was established in 2019 when the federal government introduced the ICHRA through executive order and departmental regulations. The proposed legislation seeks to codify the long-term stability regardless of future presidential administrations and enhance the existing ICHRA framework. The “rebrand” to CHOICE Arrangements signals a potential move towards greater individualization and control in health coverage. The legislation that includes the CHOICE Arrangements, One Big Beautiful Bill Act, is currently being considered in the House Ways & Means Committee and can potentially go to a vote in the House as early as Memorial Day and a vote in the Senate as early as July 4th.
• The CHOICE arrangement is more generous and easier for employers to offer tax-. advantaged benefits solutions. Think of it as an employer providing a defined contribution that employees can then use to choose a health plan that best fits their individual needs and circumstances. Like its predecessors, ICHRA and QSEHRA, CHOICE Arrangements would allow individuals to find a health plan that keeps their important doctors in network and prescriptions covered.

How does this help employers?

• Employers can offer CHOICE arrangements AND group health insurance to the same class of employees for small businesses (less than 50 employees). Currently, ICHRA allows employers to customize allowances and benefit eligibility within 11 employee classes. This means employers can offer an ICHRA to some classes, like part-time employees, while offering a group plan to another class, like salaried employees. Today, you can’t offer the same class of employees traditional group health coverage and an ICHRA or give them a choice between the two. With the proposed changes, employers could offer both a group health plan and a CHOICE arrangement to the same class, if they are a small employer.
• New employee classes could be added in the future. With the new bill, the Secretary of Health and Human Services has the ability, via regulation, to add new employee classes.

• To encourage CHOICE adoption, the bill proposes a new two-year tax credit for small businesses (fewer than 50 employees). This credit would provide $100 per employee per month for the first year and $50 per employee per month in the second year. The tax credit would be more significant than the Indiana Tax Credit implemented in 2023 or the one Ohio has been considering in 2025. Employees must be eligible for the CHOICE arrangement and have Minimum Essential Coverage (MEC).
• The bill would include the use of pre-tax payments for individual health insurance premiums through the public exchanges whereas today, employers can only offer a pre-tax deduction for off-exchange plans and Medicare.
• The notice period for the arrangement would shorten. Now, employers should give their employees at least 90 days’ notice before the ICHRA benefit starts. With the proposed changes, the CHOICE arrangement would only require a 60-day notice period.

The proposed CHOICE changes made to ICHRA would apply to plan years beginning on or after January 1, 2026.

It doesn’t just stop with changes to ICHRA, there are additional health benefit changes:

• Health accounts, such as Health Savings Accounts (HSA) and Flexible Spending Accounts (FSA), would have a number of changes in rules, such as letting two spouses contribute to the same HSA, letting workers move cash from terminated FSAs and HRAs into HSAs, and letting workers use HSA money to pay medical bills incurred within 60 days before the workers set up the HSAs. HSA money could be used to pay for physical fitness facility memberships, with a cap of $500 per year for an individual and $1,000 per year for a family.

It would allow those entitled to Medicare Part A to contribute to an HSA if they’re enrolled in a High Deductible Health Plan (HDHP). It would also allow those with HDHPs to enroll in direct primary care plans and use HSA funds to pay for those services. Currently, bronze and catastrophic plans don’t meet the HDHP requirements. Under the proposed changes, all bronze and catastrophic plans on the public Marketplace would become eligible plans for HSAs. The bill would also allow spouses to make catch-up HSA contributions to the same HSA account.

• Dependent Care accounts would change with The One Big Beautiful Bill Act allowing employers to join with other employers and hire an outside entity to provide child care that would qualify for the federal employer child care credit. The percentage of qualified care expenses covered would increase to 50%, from 25% today.
• Student loans would permanently be able to utilize the current $5,250 tax exclusion for employers’ efforts to repay employees’ student loans, which would also provide for the exclusion to grow with inflation.
• Paid family and medical leave with current tax credit, which is equal to 12.5% to 25% of the wages paid to the employees out on leave, would be permanent. The bill would let employers use the credit to pay part of the premiums for paid family leave insurance and would reduce the minimum work requirement for workers eligible for paid leave from 1 year today to six months of paid leave.
• Low-Income Special Enrollment Periods (SEPs) are currently available to those workers who qualify for tax credits, which are evaluated based upon if their annual income is 150% of the federal poverty line or less. This bill would eliminate tax credits for those individuals using the low-income SEP.
• Medicaid Changes include ending the open-ended federal matching for states and implementing work requirements. Starting January 1, 2029, individuals would be required to prove that they’re working, actively seeking employment, or participating in a job training program to receive Medicaid. States would also gain the ability to cut optional Medicaid benefits like dental and vision coverage. The Congressional Budget Office is estimating that as many as 7.6 million people could become uninsured.
• Non-Citizen premium tax credit eligibility would change. Currently, those who are lawfully present in the U.S. can receive premium tax credits through public exchanges. This bill would restrict subsidy eligibility to citizens, Lawful Permanent Residents, certain Cuban immigrants, and those with a Compact of Free Association.

Is the One Big Beautiful Bill set to happen?

Not quite. The bill did make it through the House Budget Committee on Sunday after being voted against on Friday. It now moves to the House Rules Committee, where it could face more opposition during an expected vote midweek. Once approved, it then moves onto the House of Representatives.

The hope by key leaders in the House is to bring it to a vote before Memorial Day. To become law, it would need to pass a floor vote in the House and the Senate. If the Senate makes any changes and passes the bill, it will need to go to House Budget committee once again to reconcile any differences before another vote takes place. From there, it would need the President’s signature.

TASC continues to monitor the progress of this and other benefits legislation. Even though the bill hasn’t passed, it’s a good idea to get familiar with ICHRAs and the companion compliance offerings needed for employers. In the future, consider whether a CHOICE arrangement could provide you with more flexibility and cost control for your organization or clients.

Whether you are considering an ICHRA or already offer one, TASC has 50 years of experience to help you navigate ICHRAs and other benefits, including the compliance impacts, for your business. Let TASC be your TPA of CHOICE!