Employers get tax breaks to ditch group health plans for individual-market reimbursements
S. 2875 — CHOICE Act · Filed by Tim Sheehy (R-MT) · 4 cosponsors · Introduced Sep 18, 2025 · Referred to committee
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What it does
This bill creates a new type of employer-sponsored health benefit called a 'CHOICE arrangement'—a fixed-dollar reimbursement account that employers can offer to employees to help pay for individual health insurance premiums or Medicare coverage. Employers get a tax credit ($100/month per employee in year one, $50/month in year two) for offering these arrangements, and employees can use the reimbursement to buy their own insurance on the individual market rather than through a group plan. The bill allows employers to limit these arrangements to specific classes of employees (full-time, part-time, by location, etc.) as long as all employees in that class get the same offer.
Why we flagged it
The bill's operative mechanism is a tax credit incentivizing employers to replace traditional group health plans with fixed-dollar reimbursement accounts tied to individual-market coverage. This is functionally a subsidy to employers and a structural shift in how employer-sponsored insurance operates, not merely a clarification of existing rules.
What the text implies
- Employers can legally segment their workforce by employment class and offer CHOICE arrangements only to, e.g., full-time salaried employees while excluding part-time workers—fragmenting coverage and potentially creating a two-tier system within a single employer.
- The bill permits maximum reimbursement amounts to vary by age (up to 300% for older workers) and dependent count, which may incentivize employers to target younger, single employees for CHOICE arrangements while steering older or family-covered workers toward traditional group plans or no coverage.
The full analysis lists 5 implications of this text.
Who stands to gain
employers offering CHOICE arrangements (via tax credit and reduced group-plan liability); individual health insurance carriers (increased enrollment from employer-subsidized individual-marke; health reimbursement arrangement administrators and third-party administrators