As a follow-up to our earlier post on the rise of ICHRAs[1], employers should be aware of significant changes incorporated in recently passed “One Big Beautiful Bill.” These updates take effect for plan years beginning on or after January 1, 2026, and could reshape how businesses approach individual coverage ICHRAs.
The bill codifies existing ICHRA regulations into federal law, providing legal certainty and rebranding them as “CHOICE Arrangements,” short for Custom Health Option and Individual Care Expense.[2] This reclassification not only cements the model’s future viability but also strengthens the case for broader adoption among employers. Under the new law, employees may now use pre-tax payroll deductions to purchase ACA Marketplace coverage, increasing net take-home pay and lowering employer payroll tax liabilities.[3] The bill also enhances Health Savings Accounts by expanding eligibility to Medicare enrollees, allowing payments for direct primary care, and raising contribution limits for lower-income workers.[4]
The new law allows employers to offer CHOICE Arrangements alongside traditional group health plans to the same class of employees, an option that was previously disallowed.[5] To encourage adoption, it provides a two-year tax credit for small employers: $100 per employee per month in the first year and $50 in the second year. The legislation also eases administrative burdens by shortening employee notice requirements from 90 to 60 days.[6]
Taken together, these proposed changes could significantly enhance the utility and accessibility of ICHRAs, particularly for small to mid-sized businesses seeking flexible, tax-advantaged benefits solutions. As these changes take effect next year, now is the time for employers to revisit their benefits strategy and consider how these reforms might support a more customizable and employee-focused approach to health coverage in 2026 and beyond.
[1] Wolfe & Pincavage, The Rise of ICHRAs: A New Era in Employer Health Benefits, Wolfe & Pincavage (last visited July 6, 2025), https://www.wolfepincavage.com/the-rise-of-ichras-a-new-era-in-employer-health-benefits/.
[2] Remodel Health, Individual Coverage HRA Guide, Remodel Health (last visited July 6, 2025), https://remodelhealth.com/ebook/individual-coverage-hra-guide/.
[3] Remodel Health, What the One Big Beautiful Bill Act Means for ICHRA,Remodel Health, https://remodelhealth.com/what-the-one-big-beautiful-bill-act-means-for-ichra/ (last visited July 6, 2025).
[4] See Four Changes to Medicare in the One Big Beautiful Bill Act, Kiplinger (July 3, 2025), https://www.kiplinger.com/retirement/medicare/changes-to-medicare-in-the-one-big-beautiful-bill-act.
[5] Remodel Health, supra Note 2.
[6] Id.
