Cash for coverage becomes workplace insurance option

The big picture: The option, known as Individual Coverage Health Reimbursement Arrangements (ICHRAs), emerged during the first Trump administration. They've since been rechristened CHOICE arrangements.

• Workers can use the tax-free contributions to buy individual coverage either on or off Affordable Care Act exchanges or through Medicare.
• Employers have an advantage setting the contribution level and ensuring more predictable costs, while employees, in theory, can use the money on coverage that's best suited for them.
• But companies wary about the health of the individual market have been slow to dive in.

Driving the news: In a new policy paper provided first to Axios, Morgan Health CEO Dan Mendelson and JPMC Business Banking CEO Stevie Baron call on federal and state policymakers to promote small business participation through policy changes.

• Citing heavy premium increases and large deductibles within the small group insurance market, they call for Congress to enshrine CHOICE arrangements into law, and for state legislators to consider giving employers tax credits and to strengthen state-based reinsurance programs.
• They also point to self-funded association health plans, multiple employer welfare arrangements and other options small businesses can use to offer some form of affordable coverage.

Just last month, the Trump administration promoted ICHRAs and gave them a new name.

• "CHOICE arrangements let workers choose coverage that meets their unique health care needs, which can often offer better options than traditional employer plans," Centers for Medicare and Medicaid Services administrator Mehmet Oz said at the time.

Zoom out: Though rising employer costs have shaken the benefits world, the small group market is especially struggling.

• Insurers offering small group coverage reported a median proposed premium increase of 14% for next year, according to KFF.
• "The interest in the CHOICE model really stems from the crushing rise in costs that small businesses face," Mendelson said in an interview.
• "We see that market imploding and that's why we're jumping in."

Yes, but: Enthusiasm for the program stands in contrast to warnings of high premium increases and potential instability in some ACA marketplaces following January's expiration of enhanced subsidies.

• ACA plans are unattractive to workers, undermining the success of the CHOICE program, said Brian Blase, president of the Paragon Health Institute. Blase helped create the program during the first Trump administration.
• "I am very bullish on defined contribution health insurance as a concept and I think we need to get there," he added.
• "I just think we're six years in, and they're not performing anywhere near where I expected they would, and I think to expect them to get better without significant policy changes and changing the rules ... it's probably not going to happen."

Where it stands: At least 500,000 employees now buy coverage through a CHOICE program, and use is growing, according to the HRA Council.

• The median employer allowance through defined contribution programs (either through the CHOICE program or older qualified health reimbursement arrangements) covered 81% of the median premium in 2026.
• But while a third of employers surveyed by the Employee Benefit Research Institute and Morgan Health said they're planning or evaluating a CHOICE arrangement, only 11% said they're actively planning implementation.
• Concern over premiums and out-of-pocket costs and the quality of such plans was cited as a top barrier to adoption.

The bottom line: "The growth would be faster if there were better products on the exchanges and if the exchanges were more stable," Mendelson said.

• "This should be a bipartisan issue where members could come together and say we want this to be an option for employees."