CHOICE Arrangement Act

Subjects: Taxation


<html><body><pre>[Congressional Bills 118th Congress]
[From the U.S. Government Publishing Office]
[H.R. 3799 Introduced in House (IH)]

&lt;DOC&gt;






118th CONGRESS
  1st Session
                                H. R. 3799

   To amend the Internal Revenue Code of 1986 to provide for health 
reimbursement arrangements integrated with individual health insurance 
                               coverage.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                              June 5, 2023

   Mr. Hern introduced the following bill; which was referred to the 
                      Committee on Ways and Means

_______________________________________________________________________

                                 A BILL


 
   To amend the Internal Revenue Code of 1986 to provide for health 
reimbursement arrangements integrated with individual health insurance 
                               coverage.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Custom Health Option and Individual 
Care Expense Arrangement Act'' or the ``CHOICE Arrangement Act''.

SEC. 2. TREATMENT OF HEALTH REIMBURSEMENT ARRANGEMENTS INTEGRATED WITH 
              INDIVIDUAL MARKET COVERAGE.

    (a) In General.--Section 9815(b) of the Internal Revenue Code of 
1986 is amended--
            (1) by striking ``Exception.--Notwithstanding subsection 
        (a)'' and inserting the following: ``Exceptions.--
            ``(1) Self-insured group health plans.--Notwithstanding 
        subsection (a)'', and
            (2) by adding at the end the following new paragraph:
            ``(2) Custom health option and individual care expense 
        arrangements.--
                    ``(A) In general.--For purposes of this subchapter, 
                a custom health option and individual care expense 
                arrangement shall be treated as meeting the 
                requirements of sections 2711 and 2713 of title XXVII 
                of the Public Health Service Act.
                    ``(B) Custom health option and individual care 
                expense arrangements defined.--For purposes of this 
                section, the term `custom health option and individual 
                care expense arrangement' means a health reimbursement 
                arrangement--
                            ``(i) which is an employer-provided group 
                        health plan funded solely by employer 
                        contributions to provide payments or 
                        reimbursements for medical care subject to a 
                        maximum fixed dollar amount for a period,
                            ``(ii) under which such payments or 
                        reimbursements may only be made for medical 
                        care provided during periods during which the 
                        individual is covered--
                                    ``(I) under individual health 
                                insurance coverage (other than coverage 
                                that consists solely of excepted 
                                benefits), or
                                    ``(II) under parts A and B of title 
                                XVIII of the Social Security Act or 
                                part C of such title,
                            ``(iii) which meets the nondiscrimination 
                        requirements of subparagraph (C),
                            ``(iv) which meets the substantiation 
                        requirements of subparagraph (D), and
                            ``(v) which meets the notice requirements 
                        of subparagraph (E).
                    ``(C) Nondiscrimination.--
                            ``(i) In general.--An arrangement meets the 
                        requirements of this subparagraph if an 
                        employer offering such arrangement to an 
                        employee within a specified class of employee--
                                    ``(I) offers such arrangement to 
                                all employees within such specified 
                                class on the same terms, and
                                    ``(II) does not offer any other 
                                group health plan to any employees 
                                within such specified class.
                            ``(ii) Specified class of employee.--For 
                        purposes of this subparagraph, any of the 
                        following may be designated as a specified 
                        class of employee:
                                    ``(I) Full-time employees.
                                    ``(II) Part-time employees.
                                    ``(III) Salaried employees.
                                    ``(IV) Non-salaried employees.
                                    ``(V) Employees whose primary site 
                                of employment is in the same rating 
                                area.
                                    ``(VI) Employees who are included 
                                in a unit of employees covered under a 
                                collective bargaining agreement to 
                                which the employer is subject 
                                (determined under rules similar to the 
                                rules of section 105(h)).
                                    ``(VII) Employees who have not met 
                                a group health plan, or health 
                                insurance issuer offering group health 
                                insurance coverage, waiting period 
                                requirement that satisfies the 
                                requirements of section 2708 of the 
                                Public Health Service Act.
                                    ``(VIII) Seasonal employees.
                                    ``(IX) Employees who are 
                                nonresident aliens and who receive no 
                                earned income (within the meaning of 
                                section 911(d)(2)) from the employer 
                                which constitutes income from sources 
                                within the United States (within the 
                                meaning of section 861(a)(3)).
                                    ``(X) Such other classes of 
                                employees as the Secretary may 
                                designated.
                        An employer may designate (in such manner as is 
                        prescribed by the Secretary) two or more of the 
                        classes described in the preceding subclauses 
                        as the specified class of employees to which 
                        the arrangement is offered for purposes of 
                        applying this subparagraph.
                            ``(iii) Special rule for new hires.--An 
                        employer may designate prospectively so much of 
                        a specified class of employees as are hired 
                        after a date set by the employer. Such subclass 
                        of employees shall be treated as the specified 
                        class for purposes of applying clause (i).
                            ``(iv) Rules for determining type of 
                        employee.--For purposes of clause (ii), any 
                        determination of full-time, part-time, or 
                        seasonal employment status shall be made under 
                        rules similar to the rules of section 105(h) or 
                        4980H, whichever the employer elects for the 
                        plan year. Such election shall apply with 
                        respect to all employees of the employer for 
                        the plan year.
                            ``(v) Permitted variation.--For purposes of 
                        clause (i)(I), an arrangement shall not fail to 
                        be treated as provided on the same terms within 
                        a specified class merely because the maximum 
                        dollar amount of payments and reimbursements 
                        which may be made under the terms of the 
                        arrangement for the year with respect to each 
                        employee within such class--
                                    ``(I) increases as additional 
                                dependents of the employee are covered 
                                under the arrangement, and
                                    ``(II) increases with respect to a 
                                participant as the age of the 
                                participant increases, but not in 
                                excess of an amount equal to 300 
                                percent of the lowest maximum dollar 
                                amount with respect to such a 
                                participant determined without regard 
                                to age.
                    ``(D) Substantiation requirements.--An arrangement 
                meets the requirements of this subparagraph if the 
                arrangement has reasonable procedures to substantiate--
                            ``(i) that the participant is, or will be, 
                        enrolled in coverage described in subparagraph 
                        (B)(ii) as of the beginning of the plan year of 
                        the arrangement (or as of the beginning of 
                        coverage under the arrangement in the case of 
                        an employee who first becomes eligible to 
                        participate in the arrangement after the date 
                        notice is given with respect to the plan under 
                        subparagraph (E) (determined without regard to 
                        clause (iii) thereof)), and
                            ``(ii) any requests made for payment or 
                        reimbursement of medical care under the 
                        arrangement and that the participant remains so 
                        enrolled.
                    ``(E) Notice.--
                            ``(i) In general.--Except as provided in 
                        clause (iii), an arrangement meets the 
                        requirements of this subparagraph if, under the 
                        arrangement, each employee eligible to 
                        participate is, not later than 90 days before 
                        the beginning of the plan year, given written 
                        notice of the employee's rights and obligations 
                        under the arrangement which--
                                    ``(I) is sufficiently accurate and 
                                comprehensive to appraise the employee 
                                of such rights and obligations, and
                                    ``(II) is written in a manner 
                                calculated to be understood by the 
                                average employee eligible to 
                                participate.
                            ``(ii) Notice requirements.--Such notice 
                        shall include such information as the Secretary 
                        may by regulation prescribe.
                            ``(iii) Notice deadline for certain 
                        employees.--In the case of an employee--
                                    ``(I) who first becomes eligible to 
                                participate in the arrangement after 
                                the date notice is given with respect 
                                to the plan under clause (i) 
                                (determined without regard to this 
                                clause), or
                                    ``(II) whose employer is first 
                                established fewer than 120 days before 
                                the beginning of the first plan year of 
                                the arrangement,
                        the requirements of this subparagraph shall be 
                        treated as met if the notice required under 
                        clause (i) is provided not later than the date 
                        the arrangement may take effect with respect to 
                        such employee.''.
    (b) No Inference.--To the extent not inconsistent with the 
amendments made by this section--
            (1) no inference shall be made from such amendments with 
        respect to the rules prescribed in the Federal Register on June 
        20, 2019 (84 Fed. Reg. 28888), relating to health reimbursement 
        arrangements and other account-based group health plans, and
            (2) any reference to custom health option and individual 
        care expense arrangements shall for purposes of such rules be 
        treated as including a reference to individual coverage health 
        reimbursement arrangements.
    (c) Effective Date.--The amendments made by this subsection shall 
apply to plan years beginning after December 31, 2023.
                                 &lt;all&gt;
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