Is a CHOICE Arrangement better than a group health plan?

It depends on your organization's budget, workforce, and employees' needs. CHOICE Arrangements, formerly known as ICHRAs, can provide more flexibility and cost control, while group plans may be a better fit for employers who prefer traditional, employer-sponsored coverage.

Can an employer offer both a CHOICE Arrangement and a group health plan?

Yes. Employers can use employee classes to offer a group health plan to one class of employees and a CHOICE Arrangement to another, as long as they meet applicable eligibility and class requirements.

Can employees use premium tax credits with a CHOICE Arrangement?

Generally, no. Employees who participate in a CHOICE Arrangement can't receive premium tax credits for the same months. Depending on whether the CHOICE Arrangement is considered affordable, employees may have different options if they decline the arrangement.

Can health insurance premiums increase because of claims?

Yes, for certain types of group health plans. An insurance company can consider a group’s claims experience when setting rates for some fully-insured large-group plans, while claims directly affect costs for self-funded plans. However, ACA-compliant individual and SHOP plans can’t use employer claims history to determine premiums.

Can an employer’s health insurance premium go up at renewal?

Yes. Group health insurance premiums can change at renewal based on factors such as healthcare costs, utilization, the group’s risk profile, and, for plans subject to experience rating, the group’s claims history. Employers commonly review these changes during their annual renewal period.

Does an employee with high medical claims increase everyone’s health insurance premiums?

Potentially. For a fully-insured group plan subject to experience rating, high-cost claims can result in premium increases for the whole group. In a self-funded plan, high claims can directly increase the employer’s claims expenses and may affect future stop-loss costs. Insurers can’t charge an individual employee a higher premium because of their personal medical history.

How can employers reduce health insurance costs after a high-claims year?

Employers can compare alternative plan designs, evaluate level-funded or self-funded options where appropriate, review stop-loss coverage, or consider an HRA such as a QSEHRA or CHOICE Arrangement (formerly ICHRA). An HRA can give employers more predictable costs because the employer sets a defined contribution amount, known as an allowance, rather than assuming the claims risk of a traditional group plan.

Is a CHOICE Arrangement a good alternative to group health insurance?

A CHOICE Arrangement, formerly known as ICHRA, can be a useful alternative for employers that want more predictable healthcare costs and less exposure to group claims. Instead of sponsoring traditional group coverage, the employer provides their employees with a fixed monthly allowance that they can use to purchase individual health coverage and qualified expenses. This allows employers to control their budget and gives employees the freedom to choose their own health plan.

What is an ICHRA provider?

An ICHRA provider helps employers set up and manage a CHOICE Arrangement, previously called an individual coverage health reimbursement arrangement. Depending on the provider, services may include plan design, compliance support, employee enrollment, reimbursement administration, and ongoing benefits support.

What’s the difference between Remodel Health and PeopleKeep?

Remodel Health is the largest ICHRA/CHOICE Arrangement partner by revenue and team size. It offers end-to-end ICHRA administration. Remodel Health is a great option for employers seeking a full-service ICHRA partner for hands-on benefits strategy, implementation, employee support, and ongoing administration. PeopleKeep is a product line of Remodel Health primarily for small businesses looking for straightforward, software-driven HRA administration.

How much does an ICHRA administrator cost?

ICHRA administration costs vary by provider and typically depend on factors such as the number of employees, services included, and level of support. When comparing providers, look beyond the upfront price and consider what’s included in the overall cost.

Why did CMS and the SBA rename ICHRA to the CHOICE Arrangement?

CMS and the SBA didn’t provide an official reason for the change during the announcement. However, many in the industry have long asked for a change due to how the ICHRA acronym is pronounced (it sounds like “ick”). The long, jargon-filled name didn’t clearly explain the value the benefit brings to employers and employees. CHOICE Arrangement does.

Does this change anything about my current ICHRA plan, budget, or strategy?

No. The renaming of ICHRA to the CHOICE Arrangement doesn’t impact current ICHRA benefits or the underlying regulatory framework. We’ll be communicating with customers and their employees about the name change for the sake of clarity, but there are no changes needed at this time.

As an employer offering an ICHRA, do I need to do anything right now?

No, there’s nothing that you need to do right now. PeopleKeep by Remodel Health will be sending out communications to customers about the name change, but CMS and the SBA haven’t made any changes to how the benefit functions.

Does this affect QSEHRA?

No, the rebrand of ICHRA to the CHOICE Arrangement doesn’t impact the qualified small employer HRA (QSEHRA). Congress created the QSEHRA, whereas federal regulations created ICHRA. The CMS and SBA announcement only impacts ICHRA.

Should a small business choose the CHOICE Arrangement or QSEHRA?

Both the CHOICE Arrangement and the QSEHRA are excellent fits for small businesses. The best option for your organization comes down to your business needs and employee demographics. A QSEHRA is a simple way to offer health benefits for those with fewer than 50 FTEs, but it lacks the customization options the CHOICE Arrangements provides, such as employee classes. You can learn more about the difference in our ICHRA vs. QSEHRA page.

Can an HRA help employees pay for health insurance premiums?

Yes. Depending on the type of HRA, employers can let employees use their tax-free allowance to pay for individual health insurance premiums. ICHRAs and QSEHRAs can reimburse eligible individual health insurance premiums, while GCHRAs generally don't cover insurance premiums.

Do employees pay taxes on HRA contributions?

Generally, no. Employees don't pay taxes on reimbursements for eligible medical expenses when they meet the HRA's requirements.

What's the difference between an ICHRA, QSEHRA, and GCHRA?

The right HRA depends on your organization's size, existing benefits, and goals. An ICHRA works for employers of any size and lets them vary allowances based on employee class. A QSEHRA works for employers with fewer than 50 full-time equivalent employees and comes with annual contribution limits. A GCHRA supplements an existing group health plan by helping employees pay for eligible out-of-pocket medical expenses.

Do startups have to offer health insurance?

Startups aren’t always required to offer health insurance. However, applicable large employers (ALEs) with 50 or more full-time equivalent employees (FTEs) must comply with the Affordable Care Act (ACA) employer mandate. Even when health coverage isn't required, offering a health benefit can help startups attract and retain employees.

What is the best health insurance for startups?

The best health insurance option for a startup depends on factors like company size, budget, and employee needs. Traditional group health insurance is one option, but many startups choose health reimbursement arrangements (HRAs), such as an individual coverage HRA (ICHRA) or qualified small employer HRA (QSEHRA), because they offer greater flexibility and predictable costs.

Is an ICHRA or QSEHRA better for startups?

The right choice depends on your startup's size, growth plans, and benefits goals. An ICHRA is available to employers of all sizes and offers more flexibility, including no annual contribution limits and customizable employee eligibility options. A QSEHRA is only for small businesses with fewer than 50 full-time equivalent employees (FTEs) and has annual contribution limits set by the IRS.

Can an employee use a Section 125 plan and an ICHRA together?

Yes, but only if the employee purchases an individual health insurance policy on an off-exchange marketplace.

Can a Section 125 plan pay for individual health insurance premiums?

Yes. A Section 125 premium-only plan can pay for individual premiums under specific conditions. When paired with an ICHRA, only pre-tax payroll deductions can go toward premiums for eligible off-exchange individual health insurance plans. Employees who enroll in an on-exchange plan through a public exchange, like the federal Health Insurance Marketplace or a state exchange, can't use a Section 125 cafeteria plan to pay for the portion of their premium that their ICHRA allowance doesn't cover.

Why don’t on-exchange health plans work with a Section 125 plan?

Because public exchanges already offer premium tax credits and other cost-sharing subsidies, federal law prohibits employees from using pre-tax salary reductions under a Section 125 cafeteria plan to pay on-exchange health insurance premiums. This prevents "double-dipping" tax advantages.

Can an ICHRA reimburse an employee’s entire health insurance premium payment?

This depends on the cost of the plan and the employer’s ICHRA allowance. Employers choose a set monthly allowance amount. If an employee's premium exceeds that allowance, they must pay the remaining balance unless they have access to another eligible payment method. If the plan’s cost is less than their allowance, then the ICHRA is essentially reimbursing the employee’s entire premium cost.

Can employers offer different ICHRA allowance amounts to different employees?

Yes. Employers can vary reimbursement amounts using eligible employee classes — such as full-time vs. part-time workers and salaried vs. hourly employees — as long as they adhere to federal ICHRA regulations and nondiscrimination rules. Within each class, they can also vary contributions by employee age and family size.

Does PeopleKeep administer Section 125 plans with an ICHRA?

No. PeopleKeep uses a reimbursement-based ICHRA model and therefore doesn't offer Section 125 premium-only payroll deductions. However, organizations that need this capability can do so with our parent company, Remodel Health. Contact Remodel Health or us to learn more about how our ICHRA administration solutions compare.