ICHRA is Now CHOICE: What North Carolina Employers Need to Know
The Individual Coverage Health Reimbursement Arrangement, commonly known as an ICHRA, has a new name.
On September 3, 2026, the U.S. Small Business Administration joined the U.S. Department of Health and Human Services and the Centers for Medicare & Medicaid Services to announce CHOICE Arrangements as the new public-facing name for ICHRAs. CHOICE stands for Custom Health Option and Individual Care Expense Arrangement.
For employers already familiar with ICHRAs, the most important point is simple: the name is changing, but the underlying health reimbursement arrangement remains the same.
What Is a CHOICE Arrangement?
A CHOICE Arrangement allows an employer to provide employees with a defined amount of employer-funded money that can be used to reimburse qualifying individual health insurance premiums and, depending on how the arrangement is structured, certain eligible medical expenses.
Instead of the employer selecting a traditional group health plan for everyone, eligible employees select their own qualifying individual health insurance coverage.
Employees may use a CHOICE Arrangement with qualifying individual coverage purchased through the Health Insurance Marketplace or outside the Marketplace. Under federal rules, qualifying coverage can also include Medicare Part A and Part B or Medicare Advantage for eligible participants.
What Changed From ICHRA to CHOICE?
Primarily, the name.
Federal agencies are now using CHOICE Arrangement to describe the benefit previously known as an Individual Coverage Health Reimbursement Arrangement, or ICHRA. CMS and SBA have also released new educational resources intended to help employers understand how these arrangements work, including information about costs, employer contributions and administration.
The September 2026 announcement did not create a new type of reimbursement arrangement or replace the existing ICHRA regulatory framework.
Federal tax and technical materials may continue to use the term ICHRA, particularly when discussing existing regulations, affordability calculations, tax credits and employer reporting requirements.
What Has Not Changed?
The basic structure of the arrangement remains the same:
- The arrangement is funded by the employer.
- The employer determines the amount it will make available, subject to applicable federal requirements.
- Eligible employees select qualifying individual health insurance coverage.
- Reimbursements for qualifying expenses can generally be provided tax-free to employees.
- Employers must continue to follow the federal eligibility, employee-class, contribution and administration requirements that apply to these arrangements.
- An employee’s eligibility for Marketplace premium tax credits can be affected by an offer of a CHOICE Arrangement, just as it was under the ICHRA terminology.
The federal rebranding itself does not require an employer to redesign an existing ICHRA’s contribution structure or eligibility rules.
Why Is the Federal Government Promoting CHOICE Arrangements?
The SBA and CMS are increasing educational efforts around CHOICE Arrangements, particularly for small businesses evaluating alternatives to traditional group health insurance.
With a CHOICE Arrangement, employers can establish a defined healthcare contribution rather than selecting and funding one traditional group plan for their entire workforce. Employees then choose individual coverage based on factors such as premiums, provider networks, prescription coverage, deductibles and their family’s healthcare needs.
Federal guidance also notes that employers may use permitted employee classes when determining eligibility and contribution structures. Different rules can apply depending on employer size, workforce structure and how the arrangement is designed.
What Should North Carolina Employers Know?
North Carolina employers that already offer an ICHRA should understand that references to CHOICE Arrangements generally refer to the same type of employer-funded benefit they already know as an ICHRA.
Businesses considering this approach for the first time should evaluate:
- How much the business wants to contribute toward employee health coverage
- Which employees will be eligible
- Individual health insurance options available where employees live
- How the arrangement will be administered
- Applicable affordability and compliance requirements
- How the arrangement may affect employees’ eligibility for Marketplace premium tax credits
CHOICE Arrangements are not automatically the right approach for every employer. Businesses should compare the structure and costs with traditional group health insurance before making a change.
Get Help Understanding CHOICE Arrangements
Carolina Insurance Professionals can help North Carolina employers understand CHOICE Arrangements, formerly known as ICHRAs, and evaluate how this type of health benefit compares with traditional group health insurance.
Our group health insurance team can help employers review available options, understand how individual health insurance works within a CHOICE Arrangement and determine which approach fits the needs of their business and employees.