HRAs are a powerful tool for small businesses to offer tax-free health benefits without the cost of a group insurance plan.

Health Reimbursement Arrangements (HRAs)

What Is an HRA?

An employer-funded account that reimburses employees for qualifying medical expenses and/or individual health insurance premiums tax-free.

Types of HRAs

Qualified Small Employer HRA (QSEHRA)

For employers with fewer than 50 full-time employees
No group health plan is in place
2025 limits: $6,350 individual / $12,800 family
Employees must have qualifying health coverage

Individual Coverage HRA (ICHRA)

Available to businesses of any size
No dollar limit
Can be offered to different classes of employees with different amounts
Employees purchase individual insurance and get reimbursed

Group Coverage HRA (GCHRA / Integrated HRA)

Works alongside a group health plan
Reimburses out-of-pocket costs not covered by the group plan

Tax Advantages

Employer: Contributions are deductible business expenses
Employee: Reimbursements are tax-free income
Compared to cash raise: Much more tax-efficient

QSEHRA vs. Raising Wages

A $500/month QSEHRA costs the employer $500 in deductible expense. A $500 cash raise costs the employer more (payroll taxes) and the employee gets less (after income and payroll taxes).

Small business owner? An HRA can be the most tax-efficient way to help employees with healthcare costs.

Health Reimbursement Arrangements (HRAs) for Businesses