Senate bill lets employers fund workers' individual health plans tax-free

What does this do?

S 2875 creates a "CHOICE arrangement," allowing employers to give workers a set annual amount to purchase individual health insurance on the private market or through an exchange. The employer's contribution would be tax-free, and workers could also use pre-tax dollars through a cafeteria plan to buy exchange coverage, which current law does not allow. Employers must provide written notice at least 60 days before the plan year begins explaining how the arrangement works.

Who does it affect?

The bill affects employers of all sizes who want an alternative to traditional group health coverage, and workers who would receive a fixed benefit to shop for their own insurance plan. The individual insurance market is also affected, as workers would be purchasing plans there directly.

Why does it matter?

Employers who adopt a CHOICE arrangement cannot simultaneously offer traditional group health plans to other workers in the same category, with limited exceptions, which changes how benefit decisions are structured. Workers must be enrolled in individual insurance or Medicare for the funds to be used, creating an eligibility condition that ties benefit access to prior coverage.

What does it cost, and who pays?

• Year 1 credit: up to $100/employee/month
• Year 2 credit: up to $50/employee/month
• Only non-large employers qualify

Where does it stand?