HR-5463-119
Referred to the House Committee on Ways and Means.
Sponsored by Kevin Hern (R-OK)
What it does
This bill would amend the Internal Revenue Code to formally codify a type of employer-funded health reimbursement arrangement (HRA) — called a "CHOICE arrangement" — that allows employers to give workers a fixed dollar amount to purchase their own individual health insurance on the open market or through an exchange, rather than offering a traditional group health plan. It would also allow employees in these arrangements to use pre-tax cafeteria plan dollars to buy exchange-based insurance, and would create a new tax credit of up to $100 per enrolled employee per month (for the first year, half that in the second year) for small employers who establish a CHOICE arrangement for the first time.
Who benefits
Small employers (those not classified as "applicable large employers" under the ACA) who would receive a tax credit for adopting these arrangements and would gain flexibility to offer health benefits without managing a traditional group plan. Employees at small businesses who currently receive no employer health benefit and could gain access to employer-funded dollars for individual coverage. Part-time, seasonal, and non-salaried workers who may be excluded from traditional group plans but could be included in a CHOICE arrangement class. Individual health insurance market insurers and brokers who would see increased demand. Workers who prefer to choose their own individual plan rather than accept an employer-selected group plan.
Who is hurt
Traditional group health insurance carriers and brokers who may lose employer-sponsored group plan business as employers shift to HRA models. Employees who currently receive comprehensive employer-sponsored group coverage and may see employers convert to fixed-dollar HRAs that do not keep pace with rising premiums. Workers in states with thin individual insurance markets where individual plan options are limited or expensive, leaving them with fewer viable choices. Employees who are not enrolled in individual coverage or Medicare (e.g., those covered under a spouse's plan) and thus cannot access reimbursements. ACA exchange insurers who may face adverse selection if healthier workers opt out of the exchange risk pool.
Supporters argue
Supporters argue that CHOICE arrangements give workers — especially those at small businesses that cannot afford traditional group plans — genuine purchasing power and portability, allowing them to select coverage that fits their individual needs rather than a one-size-fits-all employer plan. They contend that the existing regulatory framework for individual coverage HRAs, established by a 2019 rule, has already demonstrated employer and employee uptake, and that codifying these arrangements in statute provides legal certainty and expands access. The small-employer tax credit, they argue, directly lowers the cost barrier for businesses that currently offer no health benefit at all, potentially extending coverage to workers who have none.
Opponents argue
Opponents argue that shifting employers from group plans to fixed-dollar HRAs could erode the employer-sponsored insurance market by allowing employers to offload coverage risk onto workers, whose fixed reimbursement amounts may not keep pace with individual market premium growth. They contend that in rural or low-competition insurance markets, workers may have few individual plan options, making the "choice" illusory. Critics also argue that allowing cafeteria plan dollars to fund exchange purchases could undermine the ACA's risk pool structure by drawing healthier, employer-subsidized enrollees into the individual market while leaving sicker individuals behind, potentially destabilizing exchange premiums for those without employer support.
Constitutional context
This bill amends the Internal Revenue Code and involves federal tax credits and employer tax treatment, squarely within Congress's taxing and spending authority under Article I, §8, cl. 1. The Origination Clause (Art. I, §7, cl. 1) is satisfied as the bill originates in the House. No significant constitutional tension is present; the bill modifies existing statutory tax treatment rather than imposing new exactions or taxing unrealized income.
Checks and balances
Congress gains authority to define the structure and tax treatment of CHOICE arrangements; the Treasury, HHS, and Labor Departments are directed to conform existing regulations, with courts available to review any rulemaking under standard administrative law principles.
Historical precedent
The Trump administration's 2019 rule (84 Fed. Reg. 28888) established individual coverage HRAs administratively; this bill would codify and expand that framework in statute, and the ACA's Small Business Health Options Program (SHOP) similarly attempted to give small employers flexible coverage tools.