With the cost of health benefits continuing to rise, some employers are looking beyond traditional group plans for their workforce. Hear from Jennie Nickles, vice president of sales and retention for Sanford Health Plan, and Jason Handley, senior mid-market account executive with Thatch, about why individual coverage health reimbursement CHOICE Arrangements are getting more attention and what employers should think about before making a change.

Q: Let’s start with the basics: What is a CHOICE Arrangement?

Jason: CHOICE Arrangements became law in 2019, and the first CHOICE Arrangement plans became available in 2020. It’s still a relatively new concept compared with traditional group health plans.

Here’s an easy way to think about it: CHOICE Arrangements are to group health insurance what a 401(k) is to a pension. It puts more choice in the employees’ hands, letting them choose the plan they want instead of the plan the employer thinks they want. The employer sets a contribution amount, and employees use those dollars to choose an individual plan that works best for them.

Q: Why are employers moving to CHOICE Arrangements? 

Jason: Cost is often what gets the conversation started. Some employers have experienced several years of significant increases with their group plans and are looking for another path that can give them more predicable benefits costs.

CHOICE Arrangements can also allow employers to step back from some of the day-to-day health insurance administration. A CHOICE Arrangements platform parter can help manage employee needs and questions, allowing employers to focus on running their business.

Jennie: From the Sanford Health Plan perspective, we’re seeing that same interest. Employers are used to having a lot of control over their sponsored plans, so CHOICE Arrangements can be a shift in thinking. Once they learn how it works and understand the individual market better, many are intrigued by the possibilities. For employers dealing with difficult renewals or looking for more predictability, it gives them another option to consider instead of simply absorbing another large cost increase.

Q: What does CHOICE Arrangements mean for employees?

Jason: One of the biggest differences is choice. A group plan might give employees one, two or three plans from a single carrier. With CHOICE Arrangements, the choices depend on where an employee lives – and there can be many more plans and carriers available to them.

Plan choice can extend to families, too. An employee, spouse and children don’t necessarily have to enroll in the same plan. Each family member can choose coverage based on their individual healthcare needs.

And while employees are choosing individual coverage, their experience doesn’t have to feel completely different from a group plan. A CHOICE Arrangement platform partner can help with the application, enrollment and payment process, while employees pay any amount they owe beyond the employer contribution through simple payroll deduction.

Jennie: We sometimes hear a perception that employer-sponsored coverage must be more comprehensive than an individual plan. That isn’t always the case. Depending on the market and carrier, individual plans can offer strong coverage, too. Helping employers understand what’s available is a big part of the conversation.

Q: What should employers expect when making the change to CHOICE Arrangements?

Jennie: Having the right partner can make the shift easier. We’re working hard to make CHOICE Arrangements another option employers can consider as part of their normal quoting and renewal process. The goal is to make the transition feel comfortable and give employers support along the way.

Communication matters, especially for larger organizations. Employees need to understand what’s changing, how the new process works, and how they stand to benefit.

Jason: As with any change, there will be a learning curve. Employees are used to choosing the company’s health plan. With CHOICE Arrangements, employers determine the contribution amount only – while employees choose their own coverage.

Employers can structure contributions differently for certain employee classes. For example, they may choose different contribution strategies for salaried and hourly employees.

Implementation can move fairly quickly. We ideally like to know an employer’s intent at least 45 days before the plan’s effective date. From there, the employer, broker and CHOICE Arrangements platform partner work through onboarding and employee enrollment.

Q: What about administration and compliance?

Jennie: There’s a lot that goes into it. When we talk about a CHOICE Arrangements platform partner, we’re talking about an end-to-end solution that can support enrollment and the employee experience while also helping employers and brokers stay on top of compliance requirements.

Jason: As Jennie pointed out, because CHOICE Arrangements is overseen by the IRS, there are compliance requirements just like there are with traditional group plans. The requirements vary based on employer size. Applicable large employers, for example, have additional requirements to consider.

There are also affordability rules. Large employers need to make sure their CHOICE Arrangements plan meets IRS affordability requirements for employees. Depending on the employer, there may also be COBRA administration and 1095 reporting requirements.

A CHOICE Arrangements platform partner can support employers with affordability calculations, enrollment, reporting and other compliance responsibilities. That way, in the event of an IRS audit or an employee coming back to them, they’ll have the data to support the compliance aspect.

Q: Is CHOICE Arrangements a better option for certain types of employers?

Jennie: We want employers to have different ways to continue offering coverage, whether they’re facing a costly renewal or looking for more predictability. CHOICE Arrangements gives us another solution to bring to the table alongside other health plan options.

CHOICE Arrangements can be especially flexible for employers with workers in different states. Employees can choose among the individual plans available in their area rather than the employer having to find one carrier that works across every location.

Q: Where do you see CHOICE Arrangements going in the next few years?

Jennie: Cost pressures are a big part of why employers are paying attention. In[CD5.1] 2025, we saw an overall pharmacy increase of 6.3%. The overall cost trend across the industry increased between 10 and 10.5%. Pharmacy costs are outpacing the medical side.

For employers experiencing large increases based on the utilization of their own group, that larger individual market pool can provide some protection from that risk.

CHOICE Arrangements won’t be for everybody, and there are still unknowns even in the individual market. But we want to be proactive and make sure employers have another option available if they need to pivot.

Jason: CHOICE Arrangements isn’t just for small businesses. I think we’re going to see more large organizations move towards CHOICE Arrangements. For self-funded employers in particular, it changes the risk equation. With an individual plan, a high-cost claimant is part of a much larger pool instead of falling directly on the employer’s plan and driving costs up.

We’re also seeing more carriers, like Sanford Health Plan, lean into CHOICE Arrangements. As carriers and CHOICE Arrangements platform partners work more closely together on applications, enrollment and payments, I think the experience will continue to become more seamless.

Q: Where should employers start?

Jennie: Start with your broker. Most employers already have that relationship. A broker can establish a budget baseline, talk through what’s available and determine if CHOICE Arrangements is worth considering. Employers can also reach out directly to Sanford Health Plan.

Jason: An example I always use is how CHOICE Arrangements is another arrow in the broker’s quiver. A good broker should be looking at all the viable options and helping the employer decide what works best for their business.

For more information about CHOICE Arrangements or to walk through your health plan options, call us at (888) 535-4831 (TTY: 711) or visit the links below based on your needs.

Learn more and download the CHOICE Arrangements guide for employers.

Explore Sanford’s individual and family health plans.