How Do Small Business Health Reimbursement Arrangements Work?

Small Business

How Do Small Business Health Reimbursement Arrangements Work?

Published on October 03, 2017


A federal law passed at the end of 2016 known as the “21st Century Cures Act” provides small businesses with a potential new way to help their employees pay for health insurance.
Under this law, qualifying small businesses can use health reimbursement accounts – or HRAs – to help their employees buy health insurance and pay for health care related expenses.
Here is how it works:

  • A qualifying small employer opens an HRA account on behalf of an employee.
  • Then, in 2017, the employer can put up to $4,950 into the account for a single employee, or $10,000 for an employee with a family.
  • The employee can then buy their own individual or family health insurance plan.
  • And, they can use the money in their HRA to pay their monthly premiums or certain out of pocket costs

Be aware that employees who receive HRA contributions typically won’t be eligible for government subsidies when buying coverage on their own through a government exchange.
However, employees can shop for individual or family coverage on non-government exchanges like or when buying directly from an insurance company.
Although federal law allows HRAs to be used in this way, HRAs may not be an option in all states because some state laws restricting HRAs have not yet been updated.
For more information about Health Reimbursement Arrangements for small businesses, speak with an accountant or a legal or tax advisor.
To learn more about your small business health insurance options today, visit or speak to one of our licensed insurance agents.

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