CHOICE Act Could Change Small Business Health Benefits

The National Federation of Independent Business (NFIB) is pushing for the CHOICE Arrangement Act, federal legislation that would codify health reimbursement accounts (HRAs) into the tax code and exempt small businesses from certain restrictions. With health insurance costs up 120% since 2000 and ranking as the top concern for small businesses for over 40 years, the proposal aims to help employers bypass expensive group plans by providing pre-tax funds for individual coverage.

The legislation would allow small businesses to give employees a set amount of pre-tax dollars through an HRA to purchase their own individual health plans. According to NFIB, this approach would enable employees to select personalized plans while helping employers manage rising costs.

What This Means for Long Island Employers

While the CHOICE Act sounds appealing on paper, Long Island employers should carefully consider the implications. Moving from group coverage to individual HRAs means employees lose the negotiating power and economies of scale that come with group plans. Your accounting firm or dental practice that currently provides comprehensive group coverage would essentially be asking employees to navigate the individual insurance market alone.

The administrative burden also shifts significantly. Instead of working with a knowledgeable broker to manage one group plan, employers must track HRA contributions, ensure compliance with varying individual plan rules, and provide guidance to employees who may struggle with plan selection. As we've discussed with similar arrangements like ICHRA, what appears simple often becomes complex in practice.

The Professional Guidance Gap

One of the biggest concerns with HRA-based individual coverage is the loss of professional advocacy. When your employees have group coverage through an experienced broker, they have someone fighting for them when claims are denied or problems arise. With individual plans purchased through an HRA, employees are largely on their own when navigating insurance company bureaucracy.

New York's small to medium employers already face amplified pressure from state health insurance mandates alongside federal ACA rules. While the CHOICE Act could offer some flexibility beyond NY small group rates, it removes the personalized attention that comes with working directly with a broker who understands your business needs.

Hidden Costs and Complications

The CHOICE Act may seem like a cost-saving solution, but hidden expenses often emerge. Employees who choose inadequate coverage may face financial hardship, leading to requests for help or higher turnover. The time spent managing HRA administration, answering employee questions about plan options, and dealing with individual coverage issues can quickly exceed the administrative simplicity of group plans.

Additionally, expanded ACA open enrollment deadlines show that even with extended time frames, individuals often struggle to make informed decisions about health coverage without professional guidance.

Making the Right Choice for Your Business

Before considering any move away from group coverage, Nassau and Suffolk County employers should evaluate whether the grass is actually greener. Group plans provide predictable costs, professional management, and economies of scale that individual arrangements can't match. For most businesses with 10-50 employees, comprehensive group coverage from experienced carriers remains the most effective way to attract and retain talent while managing costs.

The key is working with advisors who can help you optimize your current group arrangement rather than abandoning it entirely. This might include exploring level-funded options, adjusting plan designs, or implementing wellness programs that provide real value to both employers and employees.

If the CHOICE Act passes, it will create another option in an already complex benefits landscape. However, proper plan administration and compliance support will become even more critical as employers navigate between group and individual coverage requirements.

The legislation is still pending in Congress with no specific enactment timeline, giving Long Island employers time to carefully evaluate their current coverage and understand all options before making any changes that could impact their ability to compete for top talent.

Compliance Note: Benefit plan rules and tax implications vary based on company size and location. This summary is for informational purposes only. Please contact your Benton Oakfield representative to review how these changes impact your specific plan documents.

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