Sponsors (10)
Introduced September 18, 2025 by Kevin Hern · Last progress September 18, 2025
The bill makes it easier and cheaper—especially for small employers—to offer employer-funded reimbursements and CHOICE arrangements that can improve affordability and access for employees, while creating new compliance burdens, fiscal costs, potential subsidy interactions, and limited or unequal long-term coverage gains.
Middle-class employees (including those on Medicare or individual-market plans) can receive employer-funded reimbursements for medical care, making health care more affordable for people who buy their own coverage.
Small employers receive a refundable tax credit (up to $100/employee-month in year one and $50 in year two, indexed after 2026) and other incentives that lower net labor costs and make it cheaper to offer CHOICE arrangements, which can expand access to employer-linked health options.
Employees participating in CHOICE arrangements retain tax-preferred cafeteria plan treatment for certain benefits, reducing taxable income for participating workers.
Reporting HRA benefit amounts on W-2 could be used by insurers or agencies when determining eligibility, premiums, or subsidy calculations for other programs, potentially raising costs or reducing marketplace subsidies for some individuals.
The refundable tax credit and continued tax exclusions reduce federal revenue or increase spending, shifting fiscal cost to taxpayers and potentially increasing deficits or crowding out other priorities.
Employers—particularly small businesses—face new administrative and compliance burdens (substantiation, nondiscrimination rules, notices, payroll reporting, and tracking CHOICE participation), raising employer costs and complexity.
Based on analysis of 4 sections of legislative text.
Allows employers to fund HRAs that reimburse care while employees remain on individual-market or Medicare coverage, adds W-2 reporting and regulatory rules, and creates a two-year employer tax credit.
Creates a new permissive employer-funded health reimbursement arrangement (a “CHOICE arrangement”) that lets employers pay or reimburse employees’ medical care while those employees remain enrolled in individual market coverage or Medicare, subject to nondiscrimination, substantiation, and notice rules. It requires Treasury, HHS, and Labor to update regulations, requires W-2 reporting of total permitted benefits, and takes effect for plan and taxable years beginning after December 31, 2025. Also changes the tax code to (1) exempt CHOICE participants from a specified cafeteria-plan rule and (2) create a two-year per-employee employer tax credit (about $100 per employee-month in year one, $50 in year two) for eligible employers that are not large-employer sponsors, with indexing after 2026 and inclusion in the general business credit.