ICHRA Has a New Name: Say Hello to CHOICE

Updated 2026-10-29

CMS and the Small Business Administration introduced the CHOICE Arrangement name on September 3, 2026. The benefit is the individual coverage health reimbursement arrangement that employers and advisers already know as ICHRA. A new name and federal awareness effort do not, by themselves, change the underlying rules.

Instead of selecting one traditional group health plan for everyone, an employer establishes a contribution employees can use toward qualifying individual coverage. Employees choose plans based on their doctors, prescriptions, expected care, premiums, and cost sharing. Qualifying reimbursements receive favorable tax treatment when the arrangement meets applicable requirements.

CMS identifies eligible coverage as ACA-compliant individual insurance bought through a Marketplace or off-exchange, Medicare Parts A and B together, or Medicare Advantage. Short-term policies, health-sharing products, indemnity coverage, and supplemental insurance are not substitutes for qualifying individual major-medical coverage under this model.

Employers decide which permitted employee classes will participate and whether eligible family members are included. CMS lists ten basic classes and allows combinations of them. Employers cannot simply invent a class to single out an individual, and offering a traditional group plan to one class while using CHOICE for another requires attention to the class rules.

Contributions can be level across the workforce or vary in permitted ways. Within a class, federal rules allow variation for age and covered dependents, with age-based contributions limited to a three-to-one ratio. Applicable Large Employers must also consider ACA employer shared-responsibility and affordability requirements.

The rebrand does not eliminate enrollment verification, reimbursement substantiation, participant notices, or reporting responsibilities. Employees generally own the individual policy they select and may keep it after leaving a job if they continue paying premiums, although the employer’s CHOICE assistance would end.

Agent Takeaway: Use both names while clients adjust: CHOICE Arrangement, formerly ICHRA. Explain the funding model before discussing products, and separate the agency’s new terminology from any future change in law or regulation.

The right comparison remains client-specific. Budget control, suitable individual plans, employee affordability, and dependable administration all need to be evaluated before recommending a transition.