What the “One, Big, Beautiful Bill Act” means for ICHRA if approved

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Key takeaways

• If approved, the One Big Beautiful Bill could reshape employer-provided health benefits. Recently approved by the U.S. House, the bill aims to update how businesses — especially small and mid-sized ones — can help employees get health coverage outside of traditional group plans.
• As part of the bill, the proposed CHOICE Arrangement would serve as a significant modernization of the current ICHRA model — offering employers a more flexible way to reimburse employees for individual health insurance. Unlike ICHRA, CHOICE would allow eligible employees to keep their premium tax credits (to help pay for coverage) and reduce some of the administrative and compliance hurdles experienced by some employers with ICHRAs.
• The CHOICE Arrangement would also introduce a two-year tax credit to small businesses who implement the plan: $100 per participating employee per month in the first year, and $50 in the second year.
• If the bill becomes law, the CHOICE Arrangement could take effect as early as 2026. While it still needs Senate and presidential approval, businesses offering ICHRA plans should stay informed, as CHOICE could soon change how employers support employees’ health coverage in the near future.

Curious about how the One Big Beautiful Bill might affect employer health benefits?

We’ll explain one of its key proposals — the CHOICE Arrangement — and how it would work alongside the current ICHRA (Individual Coverage Health Reimbursement Arrangement) model, like eHealth’s Iris platform. 

Before we dig into that, let’s review how ICHRA works today.

First: What is ICHRA?

ICHRA is an employer-funded health benefit that allows businesses of any size to reimburse employees — tax-free — for individual health insurance premiums and other qualified medical expenses.

Some key features of ICHRAs include:

• Employers set a monthly budget for each employee (amounts can vary by age, family size, etc.).
• Employees buy their own health insurance through the individual market, based on what works best for them.
• Reimbursements are tax-free, provided the employee has qualified individual coverage.
• There’s no group plan required, giving employers a way to offer benefits without managing traditional health insurance.

ICHRA is increasingly popular among small and mid-sized businesses because it offers budget control for employers, plus choice for employees. See the pros and cons of ICHRAs.

Next: What Is the CHOICE Arrangement?

The CHOICE (Customized Health Option and Individual Care Expense) Arrangement is a proposed modernization to the ICHRA structure.

If approved, it would retain ICHRA’s core idea — employers reimbursing employees for health insurance — but with more flexibility and improved tax treatment in some cases, plus a significant tax credit for small businesses.

Let’s look at the differences below if the CHOICE Arrangement within the One Big Beautiful Bill gets passed into law.  

CHOICE vs. ICHRA: What’s the Difference?

*In the chart below, the Exchange refers to the Health Insurance Marketplace created under the Affordable Care Act (ACA) — or websites like HealthCare.gov where you can shop for health insurance plans.

Feature	ICHRA (Current)	CHOICE Arrangement (Proposed)
Legal Status	Established via 2019 regulations; not codified into law	Would be codified into federal law, providing long-term stability
Name Meaning	Individual Coverage Health Reimbursement Arrangement	Custom Health Option and Individual Care Expense Arrangement
Employer Size Eligibility	Available to employers of all sizes	Available to employers of all sizes
Employee Classes	Employers can define up to 11 employee classes; cannot offer both ICHRA and group health plan to the same class	Maintains current classes; allows offering CHOICE and group health plans to the same class in small businesses
Tax Treatment	Employer money is tax-free, but employees can’t use pre-tax income to pay for Marketplace (Exchange) plans.	Employer money is still tax-free, and employees can use pre-tax income to help pay for Marketplace plans.
Small Business Tax Credit	No specific tax credit	Introduces a two-year tax credit for small businesses (< 50 employees): $100 per participating employee per month in the first year, $50 in the second year
Notice Period	Employers must provide a 90-day notice before the plan year begins	Reduces the notice period to 60 days
Implementation Timeline	Currently in effect	If passed, changes would take effect for plan years beginning January 1, 2026

Key takeaways

• Codification into law: The CHOICE Arrangement would solidify the legal foundation of ICHRAs, ensuring their longevity and stability.
• Enhanced flexibility: Small businesses could offer both CHOICE Arrangements and traditional group health plans to the same class of employees, providing greater flexibility in benefits offerings.
• Tax advantages: The introduction of a small business tax credit and the ability for employees to use pre-tax salary reductions for Exchange premiums could make CHOICE Arrangements more financially attractive for both employers and employees.
• Simplified administration: With a shorter notice period and fewer compliance steps, managing health benefits could become easier for employers.

While both arrangements support the same core strategy — individualized, portable coverage — the CHOICE Arrangement could offer more flexibility and financial advantages, especially for employees with lower incomes.

What this means for employers and employees

The CHOICE Arrangement could significantly impact the way employers offer benefits and the way employees experience them.

Let’s break it down for employers vs. employees.

For employers:

• Offers predictable budgeting, just like ICHRA
• Could reduce administrative burdens under simplified compliance rules
• Provides an opportunity to offer more competitive benefits, especially if employees can receive both tax credits and employer contributions

For employees:

• Increased flexibility in choosing health coverage
• Potential to receive both premium tax credits and employer support
• Greater ownership over personal health plan choices

eHealth’s Iris platform: Helping employers navigate change

As employer health benefits evolve, platforms like eHealth’s Iris are positioned to help businesses navigate the changes with confidence.

Iris by eHealth enables employers to:

• Easily set up and manage ICHRA plans
• Customize contributions for different classes of employees
• Offer employees a curated experience to shop for individual health plans

However the landscape evolves if CHOICE is enacted, eHealth is committed to offering support and cost-control for employers with its flagship employee-choice platform, Iris.

What’s next for the One Big Beautiful Bill?

The One Big Beautiful Bill has passed in the House of Representatives but still requires approval from the Senate and the president to become law. The timeline is uncertain, but experts anticipate potential movement later in 2025, with potential 2026 implementation for key aspects like the CHOICE Arrangement.

Until then, current ICHRA plans remain unchanged, and employers should continue to follow existing IRS and Department of Labor guidance.

Final thoughts: A Beautiful CHOICE?

The CHOICE Arrangement represents a potential shift in how employers support their teams’ healthcare needs. While still in the legislative process, it signals a continued trend toward personalized, portable, and flexible health benefits.

For businesses already offering ICHRA or considering it, now is the time to stay informed. With eHealth’s Iris platform, employers can confidently manage their current plans and be prepared to adapt as policy evolves.

NOTE: This article discusses active, pending legislation. Details of the bill could change as it moves through the legislative process, and these descriptions may not be complete or accurate. This article is not legal, tax, or accounting advice, so seek advice from your own legal, tax, or accounting advisors.

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