2019
The final ICHRA rule
The federal final rule was published June 20, 2019, allowing individual-coverage HRAs for plan years beginning on or after January 1, 2020.
The complete employer and employee resource
Learn About CHOICE Plans.
Understand CHOICE Arrangements - formerly ICHRA - including employer allowances, family affordability, plan shopping, compliance and enrollment.
CHOICE Arrangement and ICHRA: the short answer
CHOICE stands for Custom Health Option and Individual Care Expense. The central model remains familiar: an employer establishes a defined contribution, and eligible employees use it toward qualifying individual health coverage or Medicare under applicable rules.
Important: CMS publicly announced the CHOICE Arrangements name on September 3, 2026. That announcement should not be described as changing the underlying law by itself. Employers should continue following controlling statutes, regulations and formal agency guidance.
History
From ICHRA to CHOICE Arrangements
2020
ICHRA begins
ICHRA became available January 1, 2020. The ICHRA Shop began helping employers evaluate and implement the model in February 2020.
2026
CHOICE is announced
On September 3, 2026, CMS announced the CHOICE Arrangements name, giving the established ICHRA model a clearer public identity.
How a CHOICE Arrangement works
The employer chooses the contribution strategy. Employees choose qualifying individual coverage available in their market. The arrangement may reimburse eligible premiums and, depending on plan design, other qualified medical expenses.
Employer responsibilities
- Set the defined contribution budget.
- Define eligible classes and geography.
- Review affordability and family impact.
- Adopt plan documents and deliver notices.
- Provide a clear enrollment and payment process.
Family affordability
Who receives the ICHRA offer matters.
ICHRA affordability generally starts with the employee’s self-only calculation. If that offer is affordable, a spouse or child who is also offered the arrangement generally cannot receive PTC. This is different from the family-cost test used for traditional group coverage.
Employee
Test the employee’s self-only lowest-cost Silver premium after the self-only ICHRA amount.
Spouse
An offered spouse generally follows the employee result. A spouse not offered may be evaluated for PTC using full tax-household income.
Dependent children
Offered children generally follow the employee result. ALEs should obtain review before excluding children because §4980H exposure may apply.
2027 AFFORDABILITY
The confirmed federal percentage is 10.22%.
For plan years beginning in 2027, IRS Revenue Procedure 2026-26 sets the required contribution percentage under Internal Revenue Code §36B at 10.22%. An ICHRA affordability determination still requires the applicable employee self-only lowest-cost Silver premium, employer allowance and permitted location or age inputs. Applicable large employers should apply the appropriate affordability method and safe-harbor rules with qualified advisors.
This percentage is a federal affordability input—not a guarantee that a particular offer is affordable for every employee.
Why employers consider CHOICE
Predictable funding
The employer defines how much it will contribute instead of simply absorbing another group renewal.
Local plan choice
Employees select among qualifying plans available in their market, with premiums and networks that vary by geography.
Workforce flexibility
Permitted employee classes and geographic strategies may support remote, distributed and multi-state workforces.
A CHOICE Arrangement is not automatically less expensive. A credible analysis compares current group coverage, renewal, individual-market prices, networks, employee costs and family outcomes.
Frequently asked questions
Is a CHOICE Arrangement the same as ICHRA?
CHOICE Arrangement is the new public name announced for the benefit long known as ICHRA. Existing ICHRA rules and formal guidance remain essential.
When did ICHRA start?
ICHRA became available for plan years beginning on or after January 1, 2020, following the 2019 final federal rule.
Can a large employer offer CHOICE?
Yes. Employers of many sizes can use the model, but applicable large employers must address affordability, employer-mandate and reporting requirements.
Can contributions vary by family size and age?
Permitted family-size and age variations can be used, subject to the rules. The oldest participant's age-based amount may not exceed three times the youngest participant's amount within the applicable design.
Does CHOICE always save money?
No. Results depend on employee ages, geography, family composition, plan availability, networks, current group costs and contribution design.
Free CHOICE planning resource
Read or download the complete guide.
The updated 17-page resource covers history, contribution design, family affordability, classes, geography, HSA considerations, employee enrollment, brokers, vendor questions and implementation.
Talk through your situation
Bring your census, current plan design, employer contributions and renewal. We will compare the options before recommending a platform.
Book a strategy meetingSources
IRS Revenue Procedure 2026-26 — 2027 affordability percentage · 2019 HRA final rule · Department of Labor final-rule announcement · DOL model ICHRA notice · 2022 family-affordability final rule
The ICHRA Shop's February 2020 start date is a company-history statement supplied by The ICHRA Shop. This page is educational and is not legal, tax or accounting advice.