For decades, the standard choice for most American businesses has been the traditional group health insurance plan. While this model has long served as the default, it is no longer the only path forward for employers who need more adaptability.
Small and medium-sized companies often face unique challenges with traditional group plans, including unpredictable annual renewals and limited coverage options that don’t always fit a diverse team. These constraints can make it difficult for growing businesses to manage costs while still providing meaningful support to their employees.
CHOICE Arrangements (formerly ICHRA) offer a different approach by shifting the focus toward flexibility and predictability. Instead of selecting a single plan for the entire company, employers set a monthly budget that works for their bottom line. Employees then use those tax-free funds to select an individual marketplace plan that best fits their personal health needs and preferred doctors.
During a panel discussion in the U.S. Chamber of Commerce 2026 Health Summit in Washington D.C., Louis DeStefano, the chief growth officer of Oscar Health, talked about how the CHOICE model is quickly becoming a preferred alternative for businesses looking to move away from “one-size-fits-all” insurance. Recent data shows that 60% of employees are interested in making the switch to an individual model and 91% of employers that have already transitioned to CHOICE agree it was the right decision for their organization.
How CHOICE works
1. Employers set a predictable budget
Businesses decide on a fixed, monthly, tax-free contribution to put toward employees’ healthcare. This locks in the costs for the year, simplifies budgeting and provides tax benefits for the business.
2. Employees shop for a flexible plan
Employees get to shop the individual healthcare marketplace, which offers hundreds of ACA-compliant plan options from top carriers, including Oscar. They can compare and choose a plan designed specifically for their personal health needs and preferences.
3. Employees gain freedom of choice.
Each employee selects the plan that includes their preferred doctors and fits their personal budget. Because they aren’t locked into a single company plan, they have the flexibility to switch or update their coverage every year as their life changes.
CHOICE vs. traditional coverage
For many employers – especially smaller ones – the cost of traditional group health plans has posed a growing challenge. Driven by higher hospital prices, prescription drugs and the high costs of specialty medications such as GLP-1 weight-loss drugs, average premiums for small group plans are jumping by an estimated 18% this year.
These mounting costs often force companies to make tough choices: either shift more of the cost burden to employees, or cut back on coverage. While employer-sponsored coverage continues to see rising premiums and fragmented experiences, the individual market has quietly achieved something unexpected to many: cost control. The ACA market has grown to almost 22 million lives, creating a larger, more stable risk pool than any single employer could manage, resulting in a lower cost trend than the rest of the industry.
This stability is by design, rooted in the individual market’s risk-adjustment system. This mechanism balances financial performance across insurers; those that outperform the broader market contribute to a shared pool, while those that fall short receive support. This redistribution helps stabilize pricing – especially for people with chronic conditions – and discourages plans from cherry-picking members.
Employers benefit by shifting the burden of managing risk of smaller risk pools to a marketplace of over a million lives. This structural advantage can lead to significant savings; some companies have cut their healthcare costs by 15.5% on average after switching from employer plans to the individual market. The result is a solution that addresses the tough reality small employers face today: double-digit rate increases, broad networks with high price tags and limited ways to personalize coverage for their diverse workforces.
CHOICE leverages a defined contribution model that is a familiar concept similar to a 401K, which fundamentally shifts how benefits are managed.
- For Employers: CHOICE provides budget predictability by turning a variable liability into a fixed asset. It reduces administrative burden, as the employer simply sets a monthly budget and is no longer responsible for vetting plans, managing dozens of point solutions, or underwriting the long-term impact of high-cost prescriptions – that risk is carried by the individual insurer. Furthermore, it offers total eligibility control, allowing small businesses to customize contributions by group (e.g., full-time, part-time, seasonal, or geographic location).
- For Employees: Employees gain more control, plan portability and better alignment with their specific health needs. They get to choose from dozens of plans in the marketplace, rather than one or two selected by their employer, ensuring they select the plan that works best for their family and lifestyle.
CHOICE: The future of healthcare
Ultimately, the employer-sponsored insurance model was built for a different era and it is failing to keep pace with the needs of modern workers and businesses. CHOICE represents the structural solution to this broken system by giving consumers more choice and leveraging the stability of the individual market. By shifting to a defined contribution model, Oscar believes that putting financial power back into the hands of Americans will drive the competition and creative plan design necessary to make healthcare truly affordable and innovative.
While the individual market model (CHOICE) is effective, its widespread growth and stability depend on continued legal and political support. Oscar is actively advancing the legislative evolution of CHOICE through a dual-pronged policy approach:
- Federal engagement: Oscar is actively advocating for key CHOICE provisions in Congress, including codifying the coverage into law, while also seeking pathways to extend CHOICE to independent 1099 contractors.
- State momentum: The company is supporting the passage of existing bills and cultivating new legislative initiatives to increase CHOICE adoption in multiple states.