CHOICE Arrangement Act

To amend the Internal Revenue Code of 1986 to provide for health reimbursement arrangements integrated with individual health insurance coverage. 1. Short title This Act may be cited as the Custom Health Option and Individual Care Expense Arrangement Act CHOICE Arrangement Act 2. Treatment of health reimbursement arrangements integrated with individual market coverage (a) In general Section 9815(b) (1) by striking Exception.— 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 section 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 (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 part 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 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 designate. 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 for 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 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 section shall apply to plan years beginning after December 31, 2023. June 12, 2023 Reported with an amendment, committed to the Committee of the Whole House on the State of the Union, and ordered to be printed

Summary: This bill generally provides statutory authority for certain health reimbursement arrangements and other alternative health insurance options for employers. TITLE I--ASSOCIATION HEALTH PLANS ACT This title provides statutory authority for the treatment of association health plans (AHPs) as single, large employers for purposes of the Employee Retirement Income Security Act (ERISA). Under AHPs, groups of individuals or small employers join together to purchase health insurance coverage. AHPs were historically subject to the market requirements for individual and small group health plans. In 2018, the Department of Labor issued regulations that allowed an AHP to be considered a single, large employer under ERISA if certain conditions are met. The regulations have been subject to litigation, which is still ongoing. The title provides that an AHP qualifies as a single, large employer if it (1) among other listed criteria, has been in existence for at least two years before offering health insurance and was formed for a purpose other than offering health insurance; (2) meets any criteria set by Labor in a prior advisory opinion; or (3) meets any other criteria set by Labor through regulations. TITLE II--CHOICE ARRANGEMENT ACT This title provides statutory authority for regulations that allow employers to offer individual coverage health reimbursement arrangements (ICHRAs). Under ICHRAs, employers agree to reimburse employees for incurred medical expenses up to a limit for a specified period (e.g., a calendar year), and employees obtain their own individual coverage that meets certain requirements of the Patient Protection and Affordable Care Act (coverage of preventive services and no annual or lifetime limits). Payments or reimbursements under an ICHRA are tax-exempt and may only be made for medical care provided when the employee was covered by a plan that meets the requirements. Employees may also pair ICHRAs with Medicare coverage. In 2019, the Department of the Treasury, the Department of Labor, and the Department of Health and Human Services issued regulations that allow employers to offer employees ICHRAs if certain conditions are met: (1) the employer offers ICHRAs to all employees in the same class (e.g., all full-time employees) without the choice of an employer-sponsored group health plan, and (2) the employer offers the ICHRA to all employees within the class on the same terms (i.e., the amount of available funds and the terms and conditions of the benefits). The regulations also specify certain notice and verification requirements with respect to ICHRAs. The title provides statutory authority for these regulations and generally refers to ICHRAs as custom health option and individual care expense arrangements. TITLE III--SELF-INSURANCE PROTECTION ACT This title specifies that stop-loss coverage is not health insurance coverage for purposes of regulation under ERISA. It also specifies that ERISA preempts any state laws that prevent employers from obtaining stop-loss coverage. (Stop-loss coverage is liability insurance obtained by self-insured employers to cover the cost of health care expenses that exceed a certain level.) TITLE IV--SMALL BUSINESS FLEXIBILITY ACT This title requires the Internal Revenue Service to notify employers, particularly small businesses in rural areas, about the availability of ICHRAs, qualified small employer health reimbursement arrangements (QSEHRAs), and the small business health care tax credit. (QSEHRAs are available to employers with fewer than 50 full-time employees. The small business health care tax credit is available to employers with fewer than 25 full-time employees.) TITLE V--RESCISSIONS This title reduces FY2024 funding for the Prevention and Public Health Fund. TITLE VI--SENSE OF CONGRESS THAT AMERICANS SHALL HAVE HEALTHCARE FREEDOM This title expresses certain senses of Congress regarding the importance of health care freedom and free market practices.