Sponsors (12)
Official title: To amend the Internal Revenue Code of 1986 to provide for the treatment of employer-provided health reimbursement arrangements that are integrated with individual market coverage, and for other purposes.
Introduced September 18, 2025 by Kevin Hern · Last progress September 18, 2025
The bill expands employer‑backed pathways and tax advantages for employees to access individual‑market coverage and reduces short‑term employer costs with a refundable credit, while increasing federal budget costs, adding employer compliance burdens, and risking market and equity distortions.
Employees — including middle‑class workers and previously uninsured individuals — gain more ways to get help paying premiums and out‑of‑pocket costs because employers can fund HRAs that reimburse individual‑market coverage and CHOICE arrangements are encouraged by a refundable tax credit.
Small and other non‑large employers receive a refundable, AMT‑usable credit (up to $100/month in year one and $50/month in year two), lowering employer health benefit costs and making it cheaper to offer CHOICE arrangements.
Employees enrolled in CHOICE arrangements can retain pre‑tax cafeteria‑plan benefits without being disqualified under §125(f), preserving tax‑favored benefit treatment for participants.
Taxpayers ultimately bear new federal costs because refundable credits and expanded tax‑favored treatment reduce federal revenue, modestly increasing the deficit or reducing offsets for other programs.
Small employers face added administrative, payroll, and compliance burdens — from W‑2 reporting to substantiation/verification of individual‑market enrollment and applying nondiscrimination rules — raising costs for employers and plan administrators.
Shifting employees into individual‑market coverage via employer HRAs could worsen adverse selection and raise individual‑market premiums or market risk, potentially increasing costs for those buying individual plans.
Based on analysis of 4 sections of legislative text.
Defines CHOICE employer health reimbursement arrangements, imposes W-2 reporting and compliance rules, exempts participants from a cafeteria-plan nondiscrimination rule, and creates a two‑year refundable employer credit ($100/mo year 1, $50/mo year 2).
Creates a new legal category for certain employer-funded health reimbursement arrangements that are tied to individual-market coverage, sets rules employers must follow, requires W-2 reporting of benefits, and directs agencies to update existing HRA rules. It also exempts participants in these arrangements from a cafeteria-plan nondiscrimination rule and provides a two‑year refundable business tax credit to eligible employers for each enrolled employee. The changes affect plan and taxable years beginning after December 31, 2025, add compliance requirements for employers, modify tax treatment for participating employees, and provide a phased refundable credit in 2 years ($100/month year one, $50/month year two, with inflation adjustment thereafter).