ICHRA and CHOICE Arrangements: What Changed — and What Didn't

On September 3, 2026, the U.S. Small Business Administration (SBA) joined the U.S. Department of Health and Human Services (HHS) and the Centers for Medicare & Medicaid Services (CMS) to announce Custom Health Option and Individual Care Expense (CHOICE) Arrangements and new employer resources for the benefit structure previously known as Individual Coverage Health Reimbursement Arrangements (ICHRAs).

The change is already visible in federal employer-facing resources. CMS now states that CHOICE Arrangements were previously known as ICHRAs, while SBA has launched dedicated CHOICE Arrangement resources and described the September 3 initiative as a rebranded program with new tools for employers.

The terminology is changing. The underlying benefit structure has not changed simply because of the new name.

That distinction matters.

Employers, brokers, and benefits professionals are now likely to encounter both terms — ICHRA (CHOICE Arrangement) — while the broader regulatory and legislative environment continues to develop.

What Is a CHOICE Arrangement?

A CHOICE Arrangement is the term now being used in federal employer-facing materials for the health benefit structure widely known as ICHRA.

Under this model, an employer provides employees with a defined amount that can be used toward qualifying individual health coverage, subject to applicable federal requirements. Rather than selecting a traditional group health plan for the workforce, the employer establishes the benefit while eligible employees select individual coverage that fits their needs.

CMS explains that qualifying coverage can include individual health insurance purchased through a Marketplace, qualifying off-Exchange individual coverage, Medicare Parts A and B, or Medicare Advantage, as applicable.

Employers may also structure contributions using permitted employee classes and, within applicable rules, vary amounts based on factors such as age and family size.

The terminology is new.

The basic benefits model is not.

Why the September 3 Announcement Matters

The significance of this development goes beyond a new name.

ICHRA has been available to employers since 2020. What is different now is the level of federal attention being placed behind the model.

CMS has introduced dedicated employer-facing CHOICE Arrangement resources covering eligibility, contribution strategies, affordability, qualifying coverage, and third-party administration. The SBA has also created dedicated resources explaining CHOICE Arrangements to small businesses.

That increased visibility could matter for a market that has historically required substantial employer and broker education.

For many employers, traditional group health insurance remains the familiar default. ICHRA requires a different conversation: the employer defines a health benefits budget while employees select qualifying individual coverage.

Additional federal education does not guarantee adoption.

It does, however, make the model more visible within the broader employer benefits conversation.

Three Developments — Three Different Things

The current policy environment includes three related developments that should not be treated as interchangeable.

1. Federal Terminology

CMS is now using CHOICE Arrangement terminology in employer-facing materials and explicitly states that CHOICE Arrangements were previously known as ICHRAs. SBA, HHS, and CMS also publicly announced the CHOICE initiative together on September 3, 2026.

This is the change employers can see today.

It does not mean an existing ICHRA has suddenly become a different type of health benefit.

2. Federal Rulemaking

Separate federal rulemaking initiatives are focused on expanding access to Individual Coverage Health Reimbursement Arrangements.

One of those initiatives, HHS/CMS RIN 0938-AW00, is titled “Expanding Access to Individual Coverage Health Reimbursement Arrangements.” The federal Unified Agenda lists it at the Proposed Rule Stage. Related rulemaking also appears under Treasury/IRS.

The Unified Agenda describes the initiative as intended to clarify and streamline administrative requirements in order to expand employers' ability to offer health coverage through ICHRAs.

That status is important.

Potential regulatory changes should not be treated as current requirements unless and until applicable rules are formally issued and take effect.

The introduction of CHOICE terminology did not, by itself, implement those potential regulatory changes.

3. Congressional Codification

Congressional efforts to codify the ICHRA framework into federal statute represent a third and separate process.

Codification would place the framework directly in federal statute rather than leaving it primarily grounded in regulation.

Congress has considered multiple legislative paths related to CHOICE Arrangements and ICHRA codification, including the dedicated H.R. 5463 and S. 2875 CHOICE Arrangement bills and the broader H.R. 6703 package in the 119th Congress.

But the introduction of CHOICE terminology by federal agencies was not Congressional action and did not itself codify ICHRA into federal law.

Federal terminology, regulatory rulemaking, and Congressional codification may all influence the future of ICHRA — but they are not the same thing.

What Has Not Changed

For employers currently offering an ICHRA, the new terminology does not require a redesign of the benefit simply because federal agencies are introducing the CHOICE name.

The core administrative considerations remain.

Employers still need to determine employee eligibility and permitted employee classes, establish contribution structures, satisfy applicable notice and substantiation requirements, and coordinate the arrangement with qualifying individual coverage.

Applicable Large Employers must also continue to consider ACA employer shared responsibility requirements and affordability.

Employees' eligibility for Marketplace premium tax credits can likewise depend on whether an employer's ICHRA offer is considered affordable under applicable federal rules.

A terminology change does not remove those responsibilities.

What This Means for Employers Today

For most employers, the appropriate response is straightforward.

Do not redesign an existing ICHRA solely because the terminology changed.

Continue administering the arrangement under applicable requirements.

Employers and benefits professionals can begin introducing the new terminology gradually. Using ICHRA (CHOICE Arrangement) when first explaining the benefit provides continuity for people who already know ICHRA while introducing the terminology they may increasingly encounter in federal materials.

There is also no need to treat every existing reference to ICHRA in internal systems, employee materials, or administrative workflows as obsolete overnight.

The transition in industry terminology will take time.

More importantly, employers should monitor future regulatory developments separately from the terminology change. A future proposed or final rule may carry operational implications that a terminology initiative does not.

Why Third-Party Administration Is Receiving More Attention

One notable feature of the new CMS employer resources is the attention given to third-party administration.

CMS explains that CHOICE Arrangement administration may involve employee onboarding, enrollment verification, documentation, compliance-related functions, reporting, employee communications, enrollment-platform integrations, and ongoing employee support.

CMS also notes that some third-party administrators may provide capabilities such as premium payment integrations, Marketplace enrollment support, broker portals, and payroll integrations.

This reflects an important evolution in the market.

As awareness increases, the employer question increasingly moves beyond:

“Can we offer an ICHRA?”

toward:

“How do we administer it consistently and effectively?”

That second question becomes increasingly important as arrangements expand across larger and more geographically distributed workforces.

What Employers Should Watch Next

The next phase of the CHOICE transition is likely to develop on several tracks.

First, employers should watch how quickly carriers, brokers, marketplaces, administrators, payroll providers, and other industry participants adopt the new terminology.

Second, the industry should monitor the federal rulemaking process closely. Proposed and final rules, if issued, may provide more information about whether administrative requirements will change and how any changes would affect employers.

Third, Congressional activity remains important. Legislative codification would represent a fundamentally different development from an agency terminology initiative because it would place the framework directly in federal statute.

These developments may move at different speeds.

Employers should evaluate each one based on what it actually changes rather than treating every CHOICE-related announcement as a change to the underlying benefit.

A New Stage for ICHRA

The most important development is not simply that ICHRA has another name.

It is that a benefits model introduced through federal regulation in 2019 and available to employers beginning in 2020 is receiving a new level of federal attention in 2026.

That does not guarantee how quickly the market will grow.

It does not mean Congressional codification has occurred.

And it does not make ICHRA the right benefits strategy for every employer.

But it does represent another step in the evolution of individual coverage as an employer-sponsored health benefits strategy.

For employers, the immediate task is not to react to a new acronym.

It is to understand what has changed, what has not, and what may change next.