This article is for general educational purposes and is not legal or tax advice. Employers should consult qualified benefits, legal, and tax professionals when establishing or administering a CHOICE.
In our recent series on ICHRA (now called CHOICE), insurance agents use the opportunity to help employers understand not just what a CHOICE is, but also how to build one thoughtfully. Today, let’s look at how you set up a CHOICE.
Decide Whether CHOICE Fits the Employer
Start with the business, not the product. What is the employer trying to accomplish?
More predictable benefit spending or employee choice? A solution for employees spread across different geographic markets?
Employers offer CHOICE of virtually any size, subject to applicable requirements. This is also where larger employers need to pay close attention to ACA employer shared responsibility requirements and affordability.
CMS provides lowest-cost silver plan data specifically to help employers evaluate CHOICE affordability. The goal is to determine whether the structure makes sense for the employer and its workforce.
Determine Which Employees Will Be Eligible
An employer doesn’t necessarily have to offer the same health benefit structure to every employee. CHOICE regulations allow employers to use specific employee classes, including full-time, part-time, and seasonal employees; salaried versus non-salaried employees; employees covered by a collective bargaining agreement; and employees in different geographic locations.
However, employers can’t simply invent their own classifications. There are rules governing permitted classes and, in certain situations, minimum class sizes.
An employer also generally can’t offer employees within the same class a choice between a traditional group health plan and a CHOICE. This is one area where agents add significant value by helping employers think through workforce structure before implementation.
Set the Employer Contribution
Next comes how much the employer will contribute. Unlike some other HRA arrangements, CHOICE doesn’t have a general federal annual contribution ceiling.
The employer establishes the reimbursement allowance as part of the plan’s design and varies amounts within a permitted employee class based on age and number of dependents, subject to CHOICE rules. Age-based variations generally can’t exceed a 3:1 ratio.
This contributes to modeling importance. The employer should understand what its allowance actually means for employees buying coverage in their local markets, rather than simply choosing a convenient round number.
Build the Formal Plan and Administration Process
CHOICE isn’t simply a monthly stipend added to payroll. It’s an employer-funded health reimbursement arrangement with rules governing eligibility, reimbursements, substantiation, notices, opt-outs, and other plan requirements.
Employees and covered dependents generally must have qualifying individual health insurance coverage or qualifying Medicare coverage for each month they’re covered by the CHOICE. The employer also needs reasonable procedures for verifying coverage.
Employers should work with qualified benefits, tax, and legal professionals, as well as an appropriate CHOICE administrator, to establish compliant plan documents and reimbursement procedures.
Give Employees the Required CHOICE Notice
Communication isn’t an afterthought. In general, employees eligible at the beginning of the plan year must receive a CHOICE notice at least 90 calendar days before the plan year begins.
Different timing rules apply to employees who become eligible later and certain newly established employers. The U.S. Department of Labor provides a model notice employers use as a starting point.
That notice matters because a CHOICE offer affects an employee’s eligibility for Marketplace premium tax credits.
Help Employees Understand Their Coverage Choices
This may be the most important part of the entire rollout. Employees accepting the CHOICE generally need qualifying individual health coverage or qualifying Medicare coverage.
An employee offered a CHOICE may qualify for Marketplace premium tax credits only when the CHOICE doesn’t meet the applicable affordability standard and the employee opts out of the CHOICE. Employees newly offered a CHOICE outside the normal Open Enrollment window may also qualify for a Special Enrollment Period, helping them obtain coverage in time for the CHOICE to begin.
This is where good agent support becomes especially valuable. Employees aren’t just choosing a premium.
They’re evaluating networks, prescriptions, deductibles, providers, and family needs.
Make CHOICE an Annual Process, Not a One-Time Setup
An effective CHOICE should be reviewed every year. Employers should revisit contribution amounts, affordability, employee classifications, individual market conditions, and employee communication before the next plan year.
And agents should be part of that conversation. The real value of CHOICE isn’t simply replacing a group plan with reimbursements.
It’s creating a benefits strategy in which employers better define their spending while employees gain greater ability to choose coverage around their individual needs. When those two goals stay connected, CHOICE becomes much more than another benefits acronym.
It becomes a practical framework for designing health benefits around the people who actually use them.
The Agility Difference
As the insurance market changes, Agility draws on years of experience to help you deliver great service and grow your business. For all insurance questions or to connect with our Medicare, ACA, Group, CHOICE, life, and ancillary experts, contact our dedicated Producer Support at (866) 590-9771 or support@enrollinsurance.com.
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