House passes ICHRA bill to give (small) employers a 'cash-for-coverage’ option

The Custom Health Option and Individual Care Expenses (CHOICE) Arrangement Act would allow business owners to reimburse employees for individual health insurance plans - and would make that coverage portable.

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Employers could give workers cash they can use to purchase individual health coverage under legislation passed by the U.S. House on Wednesday.

The Custom Health Option and Individual Care Expenses (CHOICE) Arrangement Act codifies the health reimbursement arrangements established by the Trump administration in 2019, which allow business owners to reimburse their employees for individual health insurance plans as well as provide tax-advantaged funds for qualified medical expenses. It is meant to provide an alternative to employer-provided health plans, which are tax-privileged under current law.

“Washington should not stand in the way of workers getting the health-care coverage that’s best for them and their families,” said Rep. Jason Smith, R-Mo., chair of the House Ways and Means Committee. “Just as important, workers should be able to take their insurance plan with them if they leave their current job. This bill gives small businesses the opportunity, if they so choose, to shed the administrative burden of managing traditional insurance coverage. At the same time, it gives workers more options for their own health care and makes that coverage portable.”

The legislation, however, faces an uncertain future in the Democratic Senate. Democrats said the measure, which passed along party lines, would undermine the Affordable Care Act by reviving Trump-era rules. “This is all Trump, Trump, Trump,” said Rep. Lloyd Doggett, D-Texas, calling it “death by a thousand cuts” to Obamacare.

The bill includes a provision that requires the Treasury Department to clearly inform businesses of different tax advantages and programs that make providing health-care benefits to their employees financially feasible.

Related: Why an ICHRA can or can’t be essential for organizations: A Q&A with Annie Bushey

“Small employers want to provide these benefits to their employees to not only retain them but to ensure they have a high quality of life,” said Rep. Claudia Tenney, R-N.Y., who owns a small printing business. “It is time that we increased awareness of these programs and address any obstacles to their successful and effective implementation.”

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Small businesses consistently have reported for four decades that the cost of providing health insurance to employees is their top concern, according to the National Federation of Independent Businesses. Only 39% of businesses with between one and nine employees offer health insurance, compared to 89% of firms with 30 or more employees, according to the organization. Of those small businesses, 94% report that it is difficult to some degree to offer employer-sponsored health insurance as part of their benefits package.

The bill is part of a larger health-care package that protects self-insurance, stop-loss insurance and association health plans.