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reimbursing employees for health insurance

Reimburse for health insurance premiums tax-free

Reimburse your employees tax-free with the industry’s only HRA platform with hands-on enrollment support. 

  • Manage benefits for an hour or less per month
  • No more surprises, renewals, or participation rate concerns
  • A smart, hands-off alternative to group health insurance
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Healthcare reimbursement models 101

Take Command makes healthcare reimbursement simple and easy.

Flexible Designs

No more one-size fits all plans! HRA plans can be customized and designed to achieve you or your clients’ goals. 

Simple Administration

Take Command will automatically generate the documents your employees need and can help them search for and enroll in a plan online.

No Contribution Limits

There are no annual contribution caps. This allows employers to define unrestricted benefit budgets.

Learn More

Want to dive into the details of reimbursing employees for health insurance?

Our HRA Guide will walk you through how HRAs work, HRA benefits, and HRA setup. 

Make Healthcare Reimbursement work for you

Join the 5,000+ businesses saving on health benefits with Take Command

Union Orthotics and Prosthetics

"Facing a 40% renewal, our broker introduced us to the idea. Take Command provides the tools there for everybody to enroll in very easy formats on the platform."

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Taro Health

"To attract and maintain talent, we needed benefits. Managing our ICHRA has been simple and hands-off. I spend two hours a month managing and administering it."

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"Take Command has made it simple to set up and administer the small business HRA for StreamCare and we highly recommend it to other small businesses."

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An Introduction to Reimbursing Employees For Health Insurance

Reimbursing employees for health insurance is a common strategy used by small business owners to provide health insurance coverage to their employees. But how does health insurance reimbursement work? Basically, under a health reimbursement arrangement (HRA), the employer reimburses employees for the cost of their individual health insurance premiums and other eligible medical expenses.

There are two main types of HRAs: QSEHRAs and ICHRAs. Understanding ICHRA vs QSEHRA is critical for employers that provide health insurance reimbursement. ICHRA health insurance plans, or Individual Coverage Health Reimbursement Arrangements, allow employers to reimburse employees for the cost of individual health insurance premiums and other eligible medical expenses.

Weighing ICHRA pros and cons can be helpful for employers as they determine which type of HRA to offer their employees. Here are some of the benefits of this plan type:

  • Flexibility: ICHRAs allow employers to tailor their health benefits offerings to the specific needs of their employees, rather than being limited to a one-size-fits-all group health insurance plan.
  • Cost savings: By only reimbursing employees for the cost of their individual health insurance premiums, employers can often save money compared to providing traditional group health insurance.
  • Tax benefits: ICHRAs are typically considered a tax-free benefit for both the employer and the employee.
  • Eligibility: Employers can offer ICHRAs to a specified class of employees, such as those who work in a particular location or who meet certain job requirements, rather than being required to offer the benefit to all employees.

Downsides include:

  • Complexity: ICHRAs can be difficult to administer. They require employers to have a good understanding of tax and health insurance laws and regulations.
  • Limited coverage options: Employees may have limited health insurance coverage options, depending on where they live, which could result in higher out-of-pocket costs for some individuals.
  • Premium tax credits: Employees who participate in an ICHRA may be ineligible for premium tax credits under the Affordable Care Act, which could result in higher out-of-pocket costs for some individuals.

Browsing an “ICHRA for dummies” type guide can give you a better understanding of this type of HRA. It’s also important to become familiar with ICHRA providers and ICHRA rules if you are considering implementing ICHRA in your organization.

QSEHRAs (Qualified Small Employer Health Reimbursement Arrangements), by contrast, are designed for small employers who do not sponsor traditional group health insurance plans. They are intended to make health insurance more affordable for both employers and employees. To be eligible for a QSEHRA, employers must have fewer than 50 full-time equivalent employees and cannot offer any other group health plan to their employees.

Take Command helps employers design quality HRAs that meet the needs of their employees. Providing everything from shopping support to administration software, Take Command makes it easy for employers to manage HRAs and get their employees reimbursed quickly and efficiently.

Will health insurance reimbursement help you save on benefits? 

In about half the country, individual insurance rates are cheaper than their group plan equivalents, meaning health benefits dollars will stretch further with ICHRA. Use our heat map to see if your location is prime for saving.

What are IRS Rules For Health Insurance Reimbursement?

Employers should be aware of IRS rules for health insurance reimbursement. One of the most crucial is IRS Publication 502, which provides information on medical and dental expenses that may be claimed as itemized deductions on a taxpayer's federal income tax return. This publication explains what types of expenses qualify, what documentation is required to support the deductions, and what limits apply.

With regard to health reimbursement arrangement rules, the IRS has established a number of guidelines that employers must follow. For one, an HRA must be funded solely by the employer and has to be used to reimburse employees for eligible medical expenses incurred by the employee, their spouse, and their dependents. Employers are generally allowed to set limits on the amounts that can be reimbursed and can also limit the types of expenses that qualify. 

Additionally, HRAs must be integrated with a group health plan, meaning that the HRA cannot be used to reimburse employees for expenses that are covered by the group health plan. The HRA must comply with certain rules related to non-discrimination and HIPAA. They also have to be reported on the employee's W-2 form.

So are health insurance reimbursement plans taxable? Generally speaking, no. HRAs are employer-sponsored plans that reimburse employees for qualified medical expenses, and the IRS considers these reimbursements to be a tax-free fringe benefit. Still, employer reimbursement for health insurance premiums vary, so it’s important for business owners to be aware of how this might affect their tax situation. 

By staying on top of health reimbursement arrangement IRS rules, employers can offer quality HRAs to their employees while remaining within the scope of relevant laws and regulations. 

Can My Employer Pay My Health Insurance Premium?

If you’re an employee, you may wonder: can my employer pay my health insurance premium? Likewise, if you’re an employer, you might ask: can I reimburse my employee for health insurance premiums? More generally, can an employer reimburse employees for health insurance premiums, or can an employer reimburse an employee for health insurance premiums? The short answer to all of these questions is yes, and this is commonly offered as a benefit to attract top talent to companies.

But can an employer pay 100% of health insurance? Yes, an employer can pay 100% of health insurance for their employees. If an employer pays 100% of the premium for a group health plan, the premium payments made by the employer for the employee's health insurance coverage are generally not considered taxable income to the employee. 

However, it's important to note that the tax treatment of employer-paid health insurance premiums is subject to change, and it's always a good idea to consult a tax professional or review the most recent tax laws and regulations for the most up-to-date information.

Can a small business reimburse employees for health insurance? Just like larger organizations, small companies have the option to reimburse their employees for health insurance. Reimbursing employee health insurance under a spouse’s group plan is also possible for small businesses. Instead of providing its own group health plan, a small business can choose to reimburse employees for the cost of health insurance coverage obtained through their spouse's group plan. 

The tax treatment of these reimbursements depends on the specific circumstances and the applicable tax laws and regulations in place. If a small business reimburses an employee for the cost of health insurance coverage obtained through their spouse's group plan, the reimbursements may be considered taxable income to the employee, unless they are provided through a qualified arrangement, such as a Section 125 plan or a health reimbursement arrangement (HRA).


Ready to Get Started?

Begin designing your ICHRA plan today and be set up in minutes. You could start reimbursing your employees tax-free sooner than you think. 

Ready to get started?

Begin designing your HRA plan today and be set up in minutes. You could start reimbursing your employees tax-free sooner than you think.

Health Allowance For Employees

Health allowance for employees, sometimes referred to as a healthcare benefit allowance, is a set amount of money provided by an employer to an employee to cover the cost of healthcare expenses. These might include health insurance premiums, copayments, deductibles, and other out-of-pocket expenses.

Can you pay someone more if they don’t take benefits like health allowances? It depends on the laws and regulations in the jurisdiction in which you operate. Bear in mind that this may raise legal and ethical concerns, such as discrimination and unequal pay. Employers should be aware of their obligations under labor and employment laws, such as anti-discrimination laws, and consult with a legal professional before making any changes to their compensation structure.

Can you opt out of health insurance at any time? Again, this depends on the business and insurance plan in question. Can I drop my employer health insurance and go on Medicaid? Medicaid is a needs-based program that provides health coverage to low-income individuals and families. Eligibility for Medicaid is determined by a combination of factors, including income, assets, and household size.

Employers and employees should carefully consider cash in lieu of benefits pros and cons, as well as compensation in lieu of health insurance, to find the plans and structures that work best for them.

Individual Coverage Health Reimbursement Arrangement 

An individual coverage health reimbursement arrangement (ICHRA) allows employers to reimburse employees for individual health insurance premiums and out-of-pocket medical expenses. It was introduced as part of the 21st Century Cures Act in 2016 and is designed to give employers and employees more flexibility and control over their health benefits.

When comparing ICHRA vs group plans, there are a few things to keep in mind. First, ICHRA is generally the better option for employees that want greater control and flexibility over their premiums and medical expenses. Group plans, on the other hand, tend to offer more comprehensive coverage and often come with lower out-of-pocket costs for employees. Your group plan and/or ICHRA administration cost will depend on your specific business needs.

QSEHRA is another type of health insurance reimbursement plan. It too was created in 2016 as part of the 21st Century Cures Act and allows small employers to reimburse employees for insurance premiums and qualified medical expenses. Unlike ICHRA, however, QSEHRA is limited to employers with fewer than 50 full-time employees. 

By researching QSEHRA vs individual coverage HRA plans, employers can make an informed decision about what type of health plan(s) may be best for their employees. No two businesses are exactly alike, and so it’s important for employers to consider their specific organizational needs, as well as those of their employees, when choosing health insurance. 


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