What businesses can learn from the public sector about CHOICE arrangements

Public employers are facing a familiar benefits dilemma: renew a group plan at a sharply higher cost, cut elsewhere in the budget, or find another way to offer coverage. More and more public employers are putting CHOICE Arrangements (formerly ICHRA) to the test to solve this.

Across 25 public employers in 13 states, the pattern is clear: CHOICE is not a niche benefits experiment for private companies. In the traditional group market, 66% of employers that offer health benefits provide only one type of health plan. With CHOICE arrangements, employers set a monthly budget, and employees then use those tax-free funds to select an individual marketplace plan that best fits their personal health needs and preferred doctors. Let’s look at how the public sector is putting CHOICE into practice, and why.

Higher group premiums are driving employers to act

For some public employers, the case for CHOICE begins with a premium increase they cannot reasonably absorb. That was the case for Strasburg School District 31-J in Colorado, which transitioned to CHOICE after facing a projected 52% premium increase. MACCRAY Public Schools in Minnesota made the switch after a projected 59% increase.

Neither example suggests that CHOICE is the right answer for every employer. But when a group-plan renewal leaves little room to preserve benefits without substantially raising costs, employers need alternatives to evaluate.

CHOICE creates another option. Rather than purchasing one group plan, an employer sets a defined monthly contribution. Employees can use those tax-free dollars to choose from a wider range of individual coverage options – considering the doctors, prescriptions, premiums, deductibles, and family needs that matter to them..

CHOICE can expand benefits access for part-time workers

Public sector employers often depend on employees who work fewer than 30 hours a week, but those workers may not qualify for traditional group coverage.

The Aurora Public Library District in Illinois offers a CHOICE arrangement to staff scheduled to work 20 to 29 hours a week. The Allen County Public Library in Indiana similarly offers CHOICE access to employees working 20 to 29 hours a week, while maintaining traditional medical benefits for full-time workers.

That is a compelling use case for employers with variable-hour, seasonal or part-time workforces. For employees whose schedules fall short of a traditional eligibility threshold, CHOICE can create a path to coverage rather than treating part-time work as a reason to be left out.

Benefits design can create more budget flexibility

When health benefit costs rise, public employers may need to make cuts elsewhere like compensation, staffing, and community services.

Berkshire Local Schools in Ohio offers CHOICE to classified employees (support staff such as administrative assistants, for example) while maintaining separate group coverage for certified staff (teachers and administrators). The district’s support staff agreed to move to CHOICE as part of negotiations that included salary increases.

That example shows why benefits strategy and workforce strategy should be considered together. A more predictable healthcare contribution can give employers greater flexibility to make decisions across their total compensation budget.

CHOICE is not a cure for healthcare inflation

CHOICE does not put an end to healthcare cost increases. Monongalia County in West Virginia, which made the switch to a CHOICE Arrangement, expects its 2027 healthcare costs to reach about $6.8 million, compared with an estimated $9.3 million had it remained with its previous group-coverage model. The county still expects costs to rise about 18% over the prior year.

That is an important distinction. CHOICE can offer employers more options to pick from and a more manageable cost path and greater clarity about their financial commitment. It does not mean costs stop rising, and employers should be candid about that reality with employees.

Choose CHOICE administrators wisely

Plan design is only one part of CHOICE implementation. Employees need practical support comparing plans, doctors, prescription coverage, and out-of-pocket costs. Employers need reliable administration and compliance expertise.

Brokers have a critical role here. They can help employers assess local market conditions, select capable administrators, develop employee communications, and ensure that the operational details are in place before open enrollment begins.

Public employers face distinct constraints, but the forces shaping their benefits decisions are familiar across the market: steep renewals, diverse workforces, budget pressure, and an expectation that benefits should work for employees’ real lives. Their experience shows that CHOICE is becoming more than a response to a difficult renewal. CHOICE will not make healthcare inflation disappear. But it can give employers a more predictable commitment and employees more say in their coverage – so one punishing renewal does not decide who an institution can hire, what it can pay, or which services its community receives.