Offering health benefits can help you attract and keep great employees. But finding one health plan that works for everyone on your team can be difficult. Your employees may have different doctors, health needs, budgets, and may even live in different states.
That’s where an Individual Coverage Health Reimbursement Arrangement (ICHRA), now known as CHOICE Arrangements, can help. Instead of choosing one health plan for your team, you decide how much money to contribute toward each eligible employee’s coverage. Your employees then use that money to shop for an individual health plan that works for them.
“In almost every aspect of life, from the car we drive and the house we buy, to the phone in our pocket, we can shop for what we want,” says Louis DeStefano, SVP, Chief Growth Officer at Oscar Health. “But in the world of traditional health benefits, employees are suddenly limited to just two or three options. CHOICE Arrangements lets the employees — not their employers — pick exactly what’s right for them.”
Here’s what small business owners should know about CHOICE, how it works, and how it can give both you and your employees more options when it comes to health benefits.
What is CHOICE?
CHOICE is an employer-funded health benefit that businesses of any size can offer. You set aside a certain amount of tax-free money for each eligible employee to use toward health insurance. Employees then shop for an individual health plan that fits their needs. Depending on how the CHOICE Arrangement is set up, employees may also be able to use the money for other medical expenses like primary care visits, routine exams or prescriptions.
It’s important to note that CHOICE is not health insurance itself. Instead, it lets your business help pay for the individual health insurance your employees choose. Unlike a traditional group health plan, you don't select the health plan for your employees. They choose their own coverage from the individual market based on the options available to them.
How does CHOICE work?
Here’s how the process works.
1. You decide who is eligible and how much to contribute.
First, you decide which employees will receive the benefit and how much your business will contribute toward their healthcare costs. There is no annual minimum or maximum contribution requirement for CHOICE, so you’re free to set an amount that works for your budget.
When CHOICE requirements are met, employer contributions are generally tax-free for employees.
2. Employees shop for their health plans on the individual marketplace.
Next, employees shop for health insurance based on their own needs. They can compare plans by cost, favorite doctors, and prescription coverage. They can even choose plans made just for specific health conditions, like diabetes, COPD, or menopause.
This can be especially helpful if your employees live in different areas, since individual health plans vary by location. Plus, employees can review their options during future enrollment periods as their family statuses and healthcare needs change.
A benefits platform or CHOICE administrator can make the shopping process easier. These partners help employers set up the benefit, show them how it works, and even help them shop and compare plans.
“We know navigating health insurance can be confusing for consumers, and the transition to a new model of benefits can feel overwhelming,” says Andrew Reeves, Vice President and General Manager of CHOICE Arrangements at Oscar Health. “The great news is that the administrative platforms supporting CHOICE replace that uneasiness with clear, actionable steps to set you and your employees up for success. At the same time, they provide compassionate personal support in the situations where it is needed.”
3. Employees receive reimbursement for eligible expenses.
After choosing qualifying individual coverage, employees follow the arrangement’s process to receive reimbursement. Depending on how the arrangement is set up, that can include individual health insurance premiums and other qualified medical expenses. Businesses can also work with a broker or benefits consultant to help set up and manage their CHOICE.
Be aware that CHOICE can affect whether an employee qualifies for premium tax credits through the Health Insurance Marketplace. This depends in part on whether the CHOICE is considered affordable, so employers and employees should understand how those rules apply before making coverage decisions.
How small businesses and their employees can benefit from CHOICE
CHOICE can give you more control over how much your business spends on health benefits. At the same time, it gives your employees more freedom to choose coverage based on their own needs. Here are some of the main benefits to consider.
Greater budget predictability for employers
With a traditional group health plan, costs can change from year to year. CHOICE lets you decide how much your business will contribute toward your employees’ healthcare costs.
This defined contribution can make your benefits costs easier to plan and build into your budget. Instead of choosing and paying for a group plan for your workforce, you set the amount your business is prepared to contribute. Employees then use those funds toward the individual coverage they choose.
Flexibility for different types of workforces
CHOICE is available to employers of all sizes and can help businesses support teams in multiple states or with different healthcare needs.
With CHOICE, they can shop for individual plans available where they live rather than relying on the same group plan options.
CHOICE also does not have the same minimum participation requirements that may apply to some traditional group plans.
Is CHOICE right for your small business?
CHOICE offers more flexibility, but you have to decide if it’s right for your business. Ask yourself:
- What does my team need? Do my employees live in different states or have healthcare needs that are hard to meet with a limited set of group plans?
- What can my business afford? How much can I contribute toward each employee’s health coverage each month?
- How is my current plan working? If a traditional small group plan is becoming too expensive — or if I’m offering health benefits for the first time — CHOICE may be worth exploring.
- How much help will employees need? Some employees may need support as they compare individual health plans and learn how to use their CHOICE allowance.
- Who will help me manage the benefit? An experienced CHOICE administrator, broker, or benefits adviser can help with setup, reimbursements, and other ongoing requirements.
Before deciding, compare CHOICE with traditional group coverage and other options available to your business. Look at the costs, eligibility rules, and individual health plans available where your employees live. Talking with a broker or benefits adviser can help you weigh these factors and decide which approach makes the most sense for your business and your team.
Explore CHOICE plans from Oscar Health
CHOICE offers small businesses a different way to contribute toward employee healthcare without selecting one group plan for everyone. By setting a defined contribution, working with an administrator, and giving employees access to individual-market choices, employers can build a benefits strategy that better suits their budgets and workforce structures.
Ready to expand your employees’ healthcare options? Oscar Health is the largest carrier dedicated to the individual market and offers health plans that work with CHOICE. Oscar offers a range of plan options designed for different healthcare needs, provider preferences, and budgets. Employees using CHOICE would shop through their benefits administrator’s platform and can consider Oscar alongside other available plans. Visit the Oscar Health website to learn more about how these plans can work with your small business’s CHOICE plan.
