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The federal initiative, formerly known as Individual Coverage Health Reimbursement Arrangements, allows employers to set health benefit contributions while employees select individual coverage.

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The U.S. Small Business Administration is promoting a health benefits option designed to give small employers more control over their costs while allowing workers to choose individual health insurance coverage.

The SBA joined the U.S. Department of Health and Human Services and Centers for Medicare and Medicaid Services to announce CHOICE Arrangements, the new name for Individual Coverage Health Reimbursement Arrangements, or ICHRAs, according to an SBA news release.

SBA Administrator Kelly Loeffler and CMS Administrator Dr. Mehmet Oz unveiled the rebranded program and new employer resources at an event in Indiana.

Under the model, employers establish a monthly contribution for health benefits rather than offering a traditional group health insurance plan. Employees can then use the employer-funded benefit to obtain qualifying individual health coverage.

What’s happening

ICHRAs were established during President Donald Trump’s first administration as an alternative to traditional employer-sponsored group health plans.

With the CHOICE Arrangements branding, CMS is introducing educational resources intended to help employers evaluate and implement the benefit. According to the SBA, those materials include information on costs, employer contribution structures and third-party administration options.

The SBA said employers of any size with at least one W-2 employee can establish a CHOICE Arrangement.

Why it matters for small businesses

The SBA is positioning CHOICE Arrangements as an option for employers looking for an alternative to traditional group health coverage, including businesses offering health benefits for the first time.

According to the agency, potential benefits include predictable employer contributions, reduced administrative complexity and the ability to scale the arrangement as a business changes.

Employer contributions are generally deductible as a business expense, while reimbursements for qualified medical expenses are generally tax-free to employees, the SBA said.

SBA Pacific Regional Administrator Steven Snow said the arrangements could give entrepreneurs more flexibility to support employees while investing in their businesses.

“CHOICE Arrangements give entrepreneurs greater flexibility to support their workforce, invest in their businesses, and continue strengthening their communities,” Snow said in the release.