H.R. 5463 — Choice Arrangement

This section revises the exceptions in IRC §9815(b) to ACA group health plan market reforms (i.e., nondiscrimination requirements under §9802 and specified Public Health Service Act provisions on cost-sharing, lifetime limits, preventive services, and drug cost management) by designating the prior self-insured group health plan exception as paragraph (1) and adding a new paragraph (2) for custom health option and individual care expense arrangements. Such arrangements are employer-funded health reimbursement arrangements (HRAs) with a fixed annual dollar limit that reimburse medical care only for participants (and dependents) enrolled in individual health insurance coverage (other than excepted benefits) or Medicare Parts A/B or Part C; they must also meet nondiscrimination, substantiation, and notice requirements. Nondiscrimination requires offering the HRA uniformly to a specified class of employees (e.g., full-time, part-time, salaried, seasonal, new hires after a set date, or other Secretary-designated classes) without offering other non-excepted, non-account-based group health plans to that class (except small-group coverage); permitted variations include increases for dependents or age (up to 300% of the base amount). Substantiation requires procedures verifying enrollment in qualifying coverage at plan start (or eligibility) and for reimbursements; notice requirements apply prior to the plan year (or eligibility).

This section allows participants in a CHOICE arrangement (i.e., custom health option and individual care expense arrangement as defined in IRC §9815(b)(2)) to purchase health insurance through an Exchange using an employer cafeteria plan, by creating an exception to the restriction in IRC §125(f)(3)(A). The provision applies to taxable years beginning after December 31, 2025.

This section establishes a new general business tax credit under IRC §45BB for eligible employers (i.e., not applicable large employers under IRC §4980H, generally those with fewer than 50 full-time equivalent employees) that maintain a CHOICE arrangement (i.e., custom health option and individual care expense arrangement as defined in IRC §9815(b)(2)(B)), provided employee eligibility for the arrangement qualifies as minimum essential coverage under IRC §36B(c)(2). For each enrolled employee during the two-year credit period beginning with the month of initial establishment, the credit equals $100 per month in the first year and $50 per month ($100 amount halved) in the second year, with cost-of-living adjustments after 2026 (base year 2025). The credit is allowable against the alternative minimum tax and applies to taxable years beginning after December 31, 2025.