October 2026 | By Josh Schultz
Key Takeaways on the ACA Market and CHOICE Arrangements:
- CHOICE is becoming a meaningful source of Individual market growth, with an estimated 500,000+ covered lives in 2026 and continued growth projected through 2030.
- State policy will shape how that growth reaches health plans, including employer incentives, contribution requirements, reporting, and enrollment pathways.
Texas has a health coverage challenge including a small business affordability problem. About 16.7% of Texans, roughly 5.1 million people, remain uninsured, while small businesses employ another 5.1 million Texans, representing more than 44% of the state’s workforce.
For employers struggling with rising healthcare costs and the unpredictability of employer costs for traditional group coverage, Custom Health Option and Individual Care Expense (CHOICE) Arrangements offer another way to provide meaningful health benefits while giving employees greater control over their plan choices.
Formerly known as Individual Coverage Health Reimbursement Arrangements (ICHRA) but rebranded by CMS as CHOICE Arrangements, this program allows employers to offer employees with a tax-advantaged contribution toward qualifying Individual market coverage.
The model has grown quickly since becoming available in 2020. More than 500,000 people were covered through ICHRA at the start of 2026, roughly double the previous year, and EY-Parthenon projected that ICHRA could cover at least 11 million lives by 2030. That trajectory makes CHOICE increasingly relevant to states like Texas, where a large small business workforce, high uninsured rate, and strong ACA Individual market prime the state for broader adoption.
Those questions were front and center during two policy conversations in Austin this September addressing CHOICE. The HRA Council hosted a policy briefing led by Executive Director Robin Paoli that brought together state regulators, health insurers, enrollment platforms, legislative staff, and small business groups to discuss CHOICE adoption and the policy environment surrounding it.
The conversation continued the following day at the Texas Tribune Festival, where Paoli joined a public panel discussion touching on the challenges small businesses face in providing health coverage and the role of CHOICE.
As the 90th Legislature prepares to convene in January, the important question is no longer whether CHOICE can play a larger role in Texas. Policymakers should begin considering what needs to be in place for that growth to benefit employers, employees, and the Individual market.
Texas Has an Opportunity to Build on CHOICE Momentum
More than 1,000 Texas employers now offer either an ICHRA or its small-employer counterpart, the Qualified Small Employer Health Reimbursement Arrangement (QSEHRA), according to information shared during recent policy discussions in Austin. Together, those arrangements cover more than 50,000 Texas employees and their dependents.
National growth is happening alongside significant changes in the Individual market. Health insurers are reassessing market footprints, ACA premiums continue to rise, and carrier exits mean some Marketplace members will need to find new coverage for 2027. CHOICE introduces another source of Individual market enrollment into that environment by connecting employer health benefit dollars with plans that have traditionally served consumers purchasing coverage independently.
For Texas, that creates several areas where thoughtful state policy could help the market develop:
- Supportive state policies. The HRA Council has advocated for state policies that encourage employers to offer CHOICE, including tax credits that can help offset the cost of adopting and funding an arrangement. Softheon supports such incentives, particularly when they are structured to encourage meaningful employer contributions.
- Measure what the state is achieving. Consistent reporting can help Texas understand employer participation, enrollment, coverage gains, and the effect CHOICE has on the broader Individual market.
- Preserve multiple paths to enrollment. Brokers, web brokers, Enhanced Direct Enrollment entities, health plans, and other existing enrollment channels can help employees compare their employer contribution against available coverage and make informed choices.
Those priorities would give Texas a framework for encouraging CHOICE without trying to prescribe every part of a market that is still developing.
Supporting Employees as CHOICE Grows
Texas considered a potential option to encourage adoption during the 2025 legislative session. SB 1949, introduced by Sen. Lois Kolkhorst, would have provided qualifying small employers with either a sales and use tax refund or a franchise tax credit of up to $400 per CHOICE covered employee annually. To qualify, an employer’s ICHRA contribution would have needed to equal or exceed its previous group health insurance contribution.
If Texas uses tax incentives or other public resources to encourage CHOICE adoption, tying those incentives to meaningful employer contributions could help ensure that growth translates into affordable coverage for employees.
Texas Should Measure CHOICE Adoption Without Creating Another Employer Burden
Much of the information required to answer whether ICHRA becomes a success already moves through the systems supporting individual coverage. Enrollment, billing, employer contribution, employee premium, and payment records can provide a foundation for measuring participation without creating an entirely new reporting process for small businesses.
Building those questions into the policy framework from the beginning would give lawmakers better information as the market develops while keeping the administrative burden away from the small employers the policy is intended to help.
States and Health Plans Do Not Have to Build from Scratch
Other states are already experimenting with CHOICE policies. Indiana and Connecticut have enacted ICHRA tax incentives, while Arizona passed legislation to study the model. States operating their own exchanges are also exploring how existing Marketplace infrastructure can support employer-funded Individual coverage.
Texas has considered multiple approaches of its own. SB 1949 focused specifically on encouraging small employer ICHRA adoption through tax incentives, while HB 5455 proposed creating a Texas Health Insurance Exchange that could give the state greater flexibility over how coverage is delivered – and how to connect employers to CHOICE. Neither proposal became law in 2025, but together they demonstrate that lawmakers are already considering both the financial incentives and infrastructure surrounding Individual coverage.
Building the Infrastructure Behind CHOICE
Policy can encourage adoption, but CHOICE ultimately succeeds or fails through execution. Employers need administration and funding mechanisms. Employees need shopping and enrollment support. Health plans need to identify CHOICE-funded members, receive employer and employee premium payments, reconcile enrollment, manage changes, and support members throughout the coverage year.
Softheon supports Individual market shopping, enrollment, billing, payments, reconciliation, and CHOICE financial routing. That end-to-end view gives us a practical perspective on what happens after an employer decides to offer CHOICE and where policy decisions can either simplify or complicate the experience.
Texas has an opportunity to put the right foundation in place while the market is still taking shape. The state can encourage employer participation while protecting employees, measure results without adding unnecessary administrative burden, and preserve the enrollment infrastructure consumers already use.
The 2027 legislative session gives Texas a chance to build that framework. Have questions about CHOICE or what it could mean for your health plan or future legislation? Reach out through our Contact Us page or message me directly on LinkedIn to continue the conversation.
