This article provides general information, not individual medical, legal or tax advice. Eligibility depends on your household circumstances and the employer’s offer. Confirm details with your Marketplace, benefits administrator or a qualified tax professional. Ask HealthQuoted about licensing and plan availability in your state.
In this guide
- An employer reimbursement is not a traditional group health plan
- Start with your employer’s written notice
- How the 2026 affordability calculation works
- Declining helps only when the offer is unaffordable
- Check your spouse, children and other eligibility requirements
- Already receiving Marketplace savings? Update your application
- Outside Open Enrollment, coordinate the offer and coverage dates
An employer reimbursement is not a traditional group health plan
Turning down your employer’s health benefit does not necessarily make Marketplace insurance cheaper. With a CHOICE arrangement, the offer itself can block premium tax credits—even if you never use the employer’s money.
CMS uses the name CHOICE arrangement for what was previously called an individual coverage health reimbursement arrangement, or ICHRA. Instead of choosing a traditional group plan for participating employees, the employer provides a set amount to reimburse qualifying coverage costs. You choose your own individual insurance. Depending on the arrangement, reimbursements may cover premiums alone or premiums and other qualified medical expenses.
Qualifying coverage can include Marketplace plans, individual major medical plans purchased outside the Marketplace, or certain Medicare coverage. Short-term insurance and limited-benefit products do not qualify. This is guidance on existing rules for 2026, not a newly announced coverage requirement.
Start with your employer’s written notice
Your employer’s notice supplies information you need for the Marketplace application. HealthCare.gov tells employers to provide it to current employees 90 days before each plan year and to new employees as soon as they become eligible.
Review the notice and ask the employer or benefits administrator to clarify anything missing:
- When can the arrangement start for you?
- How much will the employer contribute, and what is the monthly equivalent?
- Does the offer include your spouse or children?
- Which expenses can be reimbursed?
- How and by when do you accept or formally decline?
How the 2026 affordability calculation works
The calculation uses the lowest-cost self-only Silver plan available to you through the Marketplace—not necessarily the plan you want to buy. Subtract the employer’s monthly reimbursement from that plan’s monthly premium.
For 2026 plans, HealthCare.gov describes the offer as affordable when the remaining monthly cost is less than 9.96% of one-twelfth of your annual household income. Household income is not simply your wages: the IRS generally uses your modified adjusted gross income plus that of other tax-family members required to file federal income tax returns.
Hypothetical example—not a quote or eligibility determination: Suppose annual household income is $60,000 and the lowest-cost self-only Silver premium is $600 a month. Monthly household income is $5,000, and 9.96% of that is $498. A $200 monthly employer contribution leaves $400, below the threshold. A $50 contribution leaves $550, above it. These figures illustrate affordability only; they do not establish tax-credit eligibility.
- Remaining monthly cost = lowest-cost self-only Silver premium minus monthly employer reimbursement.
- 2026 comparison amount = annual household income ÷ 12 × 9.96%.
- Enter accurate offer and income information on your application so the Marketplace can determine affordability.
HealthCare.gov: CHOICE affordability rules and tools ↗IRS: What counts as household income ↗
Declining helps only when the offer is unaffordable
The key distinction is between having an affordable offer and choosing to use it. Your preference for a different plan does not change the affordability result.
- Affordable offer: You cannot receive Marketplace premium tax credits, even if you decline the arrangement.
- Unaffordable offer that you decline: You may qualify for Marketplace premium tax credits if you meet all other requirements.
- Arrangement you accept: You cannot also receive Marketplace premium tax credits, even if the offer was unaffordable.
Check your spouse, children and other eligibility requirements
First confirm who is actually offered the arrangement. CMS says employers decide whether to include spouses and dependents. An affordable offer can also block credits for family members offered the arrangement; turning it down does not by itself restore eligibility.
If a spouse or child is not offered the HRA, ask the Marketplace to evaluate that person separately rather than assuming everyone gets the same result. Report other coverage available to each person, including a spouse’s employer plan. Do not replace the self-only Silver premium with a family premium in the CHOICE affordability calculation.
Declining an unaffordable offer is only one part of qualifying for premium tax credits. Other requirements include:
- Income: For 2026, the IRS generally sets eligibility between 100% and 400% of the federal poverty line for the applicable family size.
- Tax status: You generally cannot be claimed as someone else’s dependent. Married applicants generally must file jointly, with limited exceptions.
- Coverage: Credits apply to eligible Marketplace coverage, not plans purchased outside the Marketplace or catastrophic coverage.
- Other insurance: Access to other affordable employer coverage that meets minimum value, or eligibility for government coverage such as Medicare, Medicaid or CHIP, can prevent eligibility.
CMS: Eligibility for spouses and dependents ↗IRS: Premium tax credit eligibility ↗
Already receiving Marketplace savings? Update your application
Report the new employer offer promptly, including its start date, contribution amount and who is eligible. Also update changes in household income, family size and other coverage. Do not assume declining the offer means your existing advance tax credits can continue unchanged.
Advance credits are estimates. You reconcile them with the credit you actually qualify for using Form 8962 when filing your federal income tax return. According to the IRS, for tax years after 2025 there is no repayment cap on excess advance premium tax credits: the full excess reduces your refund or increases your balance due. Keeping your application current can reduce the risk of a mismatch.
Outside Open Enrollment, coordinate the offer and coverage dates
Becoming eligible for a CHOICE arrangement may provide a Special Enrollment Period. HealthCare.gov identifies situations such as newly eligible hires, an employer ending traditional group coverage, or an offer to a new employee class. Include the arrangement’s possible start date when applying.
Generally, employees using the arrangement need to apply and select a plan in time for coverage to begin by the first day the arrangement can start. Confirm your enrollment window and coverage date with your Marketplace; procedures may vary by state.
- Gather the employer notice and an updated household-income estimate before applying.
- Confirm the Marketplace eligibility result and your employer’s acceptance or opt-out process.
- Compare premiums, deductibles, prescription coverage, provider networks and expected family healthcare needs—not just the employer contribution.
HealthCare.gov: Starting coverage with a CHOICE arrangement ↗
Common questions
Is a CHOICE arrangement different from an ICHRA?
The federal guidance provided here describes CHOICE arrangements as the arrangements previously called individual coverage HRAs, or ICHRAs. The employer reimburses qualifying expenses rather than providing a traditional group health plan.
Can I use my employer’s reimbursement for a Marketplace plan?
Yes, a qualifying Marketplace plan can be used with the arrangement. But participating in the arrangement prevents you from also receiving Marketplace premium tax credits. Marketplace enrollment and eligibility for savings are separate questions.
Can I keep my individual policy if I leave my job?
CMS says you generally can keep the individual coverage you selected if you continue paying its premiums. The employer’s CHOICE arrangement would no longer be available to help with those costs.
Sources and publication details
- CMS: Employer Initiatives ↗
- HealthCare.gov: Individual coverage Health Reimbursement Arrangements ↗
- IRS: Questions and answers on the Premium Tax Credit ↗
Sources checked automatically Oct 18, 2026. AI-assisted article with automated editorial checks. Read our editorial process.