118 HR 3799 IH: Custom Health Option and Individual Care Expense Arrangement Act
U.S. House of Representatives
2023-06-05
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I
118th CONGRESS
1st Session
H. R. 3799
IN THE HOUSE OF REPRESENTATIVES
June 5, 2023
Mr. Hern introduced the following bill; which was referred to the Committee on Ways and Means
A BILL
To amend the Internal Revenue Code of 1986 to provide for health reimbursement arrangements integrated with individual health insurance coverage.
1.

Short title
This Act may be cited as the “Custom Health Option and Individual Care Expense Arrangement Act” or the “CHOICE Arrangement Act”.
2.

Treatment of health reimbursement arrangements integrated with individual market coverage
(a)

In general
Section 9815(b) of the Internal Revenue Code of 1986 is amended—
(1)
by striking “Exception.—Notwithstanding subsection (a)” and inserting the following:
“Exceptions.—
(1)

Self-insured group health plans
Notwithstanding subsection (a)”, and
(2)
by adding at the end the following new paragraph:
“(2)

Custom health option and individual care expense arrangements
(A)

In general
For purposes of this subchapter, a custom health option and individual care expense arrangement shall be treated as meeting the requirements of sections 2711 and 2713 of title XXVII of the Public Health Service Act.
(B)

Custom health option and individual care expense arrangements defined
For purposes of this section, the term “custom health option and individual care expense arrangement” means a health reimbursement arrangement—
(i)
which is an employer-provided group health plan funded solely by employer contributions to provide payments or reimbursements for medical care subject to a maximum fixed dollar amount for a period,
(ii)
under which such payments or reimbursements may only be made for medical care provided during periods during which the individual is covered—
(I)
under individual health insurance coverage (other than coverage that consists solely of excepted benefits), or
(II)
under parts A and B of title XVIII of the Social Security Act or part C of such title,
(iii)
which meets the nondiscrimination requirements of subparagraph (C),
(iv)
which meets the substantiation requirements of subparagraph (D), and
(v)
which meets the notice requirements of subparagraph (E).
(C)

Nondiscrimination
(i)

In general
An arrangement meets the requirements of this subparagraph if an employer offering such arrangement to an employee within a specified class of employee—
(I)
offers such arrangement to all employees within such specified class on the same terms, and
(II)
does not offer any other group health plan to any employees within such specified class.
(ii)

Specified class of employee
For purposes of this subparagraph, any of the following may be designated as a specified class of employee:
(I)
Full-time employees.
(II)
Part-time employees.
(III)
Salaried employees.
(IV)
Non-salaried employees.
(V)
Employees whose primary site of employment is in the same rating area.
(VI)
Employees who are included in a unit of employees covered under a collective bargaining agreement to which the employer is subject (determined under rules similar to the rules of section 105(h)).
(VII)
Employees who have not met a group health plan, or health insurance issuer offering group health insurance coverage, waiting period requirement that satisfies the requirements of section 2708 of the Public Health Service Act.
(VIII)
Seasonal employees.
(IX)
Employees who are nonresident aliens and who receive no earned income (within the meaning of section 911(d)(2)) from the employer which constitutes income from sources within the United States (within the meaning of section 861(a)(3)).
(X)
Such other classes of employees as the Secretary may designated.
An employer may designate (in such manner as is prescribed by the Secretary) two or more of the classes described in the preceding subclauses as the specified class of employees to which the arrangement is offered for purposes of applying this subparagraph.
(iii)

Special rule for new hires
An employer may designate prospectively so much of a specified class of employees as are hired after a date set by the employer. Such subclass of employees shall be treated as the specified class for purposes of applying clause (i).
(iv)

Rules for determining type of employee
For purposes of clause (ii), any determination of full-time, part-time, or seasonal employment status shall be made under rules similar to the rules of section 105(h) or 4980H, whichever the employer elects for the plan year. Such election shall apply with respect to all employees of the employer for the plan year.
(v)

Permitted variation
For purposes of clause (i)(I), an arrangement shall not fail to be treated as provided on the same terms within a specified class merely because the maximum dollar amount of payments and reimbursements which may be made under the terms of the arrangement for the year with respect to each employee within such class—
(I)
increases as additional dependents of the employee are covered under the arrangement, and
(II)
increases with respect to a participant as the age of the participant increases, but not in excess of an amount equal to 300 percent of the lowest maximum dollar amount with respect to such a participant determined without regard to age.
(D)

Substantiation requirements
An arrangement meets the requirements of this subparagraph if the arrangement has reasonable procedures to substantiate—
(i)
that the participant is, or will be, enrolled in coverage described in subparagraph (B)(ii) as of the beginning of the plan year of the arrangement (or as of the beginning of coverage under the arrangement in the case of an employee who first becomes eligible to participate in the arrangement after the date notice is given with respect to the plan under subparagraph (E) (determined without regard to clause (iii) thereof)), and
(ii)
any requests made for payment or reimbursement of medical care under the arrangement and that the participant remains so enrolled.
(E)

Notice
(i)

In general
Except as provided in clause (iii), an arrangement meets the requirements of this subparagraph if, under the arrangement, each employee eligible to participate is, not later than 90 days before the beginning of the plan year, given written notice of the employee’s rights and obligations under the arrangement which—
(I)
is sufficiently accurate and comprehensive to appraise the employee of such rights and obligations, and
(II)
is written in a manner calculated to be understood by the average employee eligible to participate.
(ii)

Notice requirements
Such notice shall include such information as the Secretary may by regulation prescribe.
(iii)

Notice deadline for certain employees
In the case of an employee—
(I)
who first becomes eligible to participate in the arrangement after the date notice is given with respect to the plan under clause (i) (determined without regard to this clause), or
(II)
whose employer is first established fewer than 120 days before the beginning of the first plan year of the arrangement,
the requirements of this subparagraph shall be treated as met if the notice required under clause (i) is provided not later than the date the arrangement may take effect with respect to such employee.”.
(b)

No inference
To the extent not inconsistent with the amendments made by this section—
(1)
no inference shall be made from such amendments with respect to the rules prescribed in the Federal Register on June 20, 2019 (84 Fed. Reg. 28888), relating to health reimbursement arrangements and other account-based group health plans, and
(2)
any reference to custom health option and individual care expense arrangements shall for purposes of such rules be treated as including a reference to individual coverage health reimbursement arrangements.
(c)

Effective date
The amendments made by this subsection shall apply to plan years beginning after December 31, 2023.