Can My Employer Pay My Health Insurance Premium?

Employers can pay a significant portion of your health insurance premium, but it depends on the type of plan you have. Some employers offer fully insured plans, where they pay a fixed percentage of the premium, while others offer self-insured plans, where they pay the entire premium.

In the United States, the Affordable Care Act requires employers with 50 or more full-time employees to offer health insurance coverage to their employees. This is known as the Employer Shared Responsibility provision.

Employers can deduct the cost of health insurance premiums from your paycheck, which can help reduce your taxable income. This is a great perk, especially for employees who itemize their deductions.

Many employers also offer health savings accounts (HSAs) or flexible spending accounts (FSAs) to help you save for medical expenses. These accounts allow you to set aside pre-tax dollars for medical expenses, which can help reduce your taxable income.

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Employers can offer HRAs, which are employer-funded health benefits that reimburse employees tax-free for out-of-pocket medical expenses, including health insurance premiums. This is especially beneficial for small business owners who may not be able to afford a group health plan.

With an HRA, employers can control their own budgets and set a monthly allowance that they can afford. This means they can offer employees as much or as little as they choose. According to John F. Pace, a CPA at Pace & Associates, HRAs offer greater flexibility and tax benefits.

Employers can use HRAs to reimburse employees for health insurance premiums, and there are no limits to how much an employer can offer for reimbursement. However, the IRS sets annual contribution limits for QSEHRA, which is a type of HRA available to employers with fewer than 50 employees. For 2025, the annual limit is $6,350 for single coverage and $12,800 for family coverage.

Here's a comparison of the two types of HRAs:

HRAs are a cost-effective health insurance option compared to traditional group health insurance. They allow employers to reimburse employees tax-free for out-of-pocket medical expenses.

Employers can offer a stand-alone HRA, which reimburses employees for their insurance premium costs instead of buying the health plan coverage for them. This is especially beneficial in states where individual coverage is cheaper than group coverage.

HRAs are a more affordable alternative to traditional group health plans because employers control their own budgets. They set a monthly allowance that they can afford, so they can offer employees as much or as little as they choose.

Unlike traditional group health plans, HRAs aren't subject to unpredictable rate increases or strict participation requirements. This makes them a more attractive option for small business owners who may struggle with the financial burden of group health insurance.

Employers can also offer greater flexibility with HRAs, as they can choose to offer more or less coverage based on their budget. This is beneficial for businesses with varying budgets or those that need to adjust their benefits administration.

For example, John F. Pace, a CPA with over 40 years of experience, has observed the benefits of HRAs firsthand. He notes that transitioning a client from a traditional group insurance plan to an HRA resulted in notable cost savings and streamlined benefits administration.

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HRAs offer tax advantages and work with all budgets, making them a more affordable alternative to traditional group health plans.

Employers can set a monthly allowance that they can afford, offering employees as much or as little as they choose.

A QSEHRA is only available to employers with fewer than 50 full-time equivalent employees (FTEs), while an ICHRA is available to employers of all sizes.

The QSEHRA has annual contribution limits, with a maximum of $6,350 for single coverage and $12,800 for family coverage in 2025.

There are no contribution limits with an ICHRA.

Employers can offer different allowance amounts based on whether the employee is an individual or has a family with a QSEHRA, or offer different allowance amounts to different classes of employees based on job criteria with an ICHRA.

With a QSEHRA, employer funds can roll over from month to month and year to year, but total QSEHRA amounts can't exceed the annual maximum allowance limit.

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Employer funds can roll over month to month and year to year with an ICHRA.

Employers can reimburse employees for their insurance premium costs instead of buying the health plan coverage for them with a stand-alone HRA.

Reimbursements are exempt from payroll taxes for employers with an HRA.

Unlike a traditional group health plan, an HRA isn't subject to unpredictable rate increases or strict participation requirements.

Employers can choose to offer a QSEHRA to reimburse employees for insurance premiums and medical expenses, or an ICHRA to reimburse employees for insurance premiums and qualified medical expenses.

A health stipend can be used to offer reimbursement for a wider range of items beyond what is allowed by the IRS, but will be subject to income tax, payroll tax, and employer tax.

Employers can choose what they want their ICHRA to reimburse, including insurance premiums only or insurance premiums + qualified medical expenses.

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ICHRA and QSEHRA are two types of HRAs that allow employers to pay for health insurance premiums. ICHRA is for companies of any size, with no limits to how much an employer can offer for reimbursement.

Employers with less than 50 employees can use the QSEHRA to reimburse for premiums and medical expenses if the plan allows. QSEHRA has restrictive limits, a big difference from ICHRA.

ICHRA classes are one of the many pros of considering ICHRA, as employers can offer as much or as little as they'd like as long as it's offered fairly to each class.

ICHRA is one of the tools that allows you to use an HRA to pay insurance premiums. It's also referred to as an ICHRA plan in some cases. Employers can offer as much or as little as they’d like as long as it’s offered fairly to each class. ICHRA classes are one of the many pros if you are wanting to consider ICHRA pros and cons.

With ICHRA, employers can provide reimbursement for their employees' medical expenses, out-of-pocket costs, and health insurance premiums. Employers have the freedom to reimburse a wider range of items beyond what is allowed by the IRS.

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ICHRA reimbursement eligibility is based on specific criteria. Employers can choose what they want their ICHRA to reimburse, which can include insurance premiums only or insurance premiums + qualified medical expenses.

ICHRA allows employers to reimburse for a wide range of medical expenses, including doctor visits, copays, dental cleanings, prescriptions, and eye glasses. However, employers can choose to exclude certain categories of expenses, as long as the exclusion is applied fairly to everyone.

ICHRA is designed for companies of any size, and there are no limits to how much an employer can offer for reimbursement. This is a big difference from QSEHRA, which has restrictive limits.

Here are the specific types of expenses that ICHRA can reimburse:

ICHRA does not reimburse for premiums of employees on their spouse's group plan. However, employers can choose to allow employees to make claims for these group plan premiums on a QSEHRA, but only if the spouse is making a payroll deduction on a pre-tax basis.

Employer-sponsored coverage is a great option to consider. If your employer offers health coverage, you should probably take it, as it may mean you can't get tax credits on Get Covered Illinois/HealthCare.gov.

To qualify for employer-sponsored coverage, you must meet certain requirements, such as working a certain number of hours each week and having worked for the employer for a certain amount of time. The waiting period cannot be longer than 90 days.

If your employer-sponsored plan is considered "affordable", you won't qualify for government help through tax subsidies to reduce the premium on an individual plan. The plan is considered affordable if it costs less than 9.02% of your household's total income and meets a certain benefits level.

Here's a breakdown of what it means for a plan to be considered affordable for an individual and for a family:

Note that the "family glitch" was a rule that previously prevented spouses and children from qualifying for subsidies on Get Covered Illinois/HealthCare.gov if the employer offered coverage that was affordable for the employee's policy alone. However, this rule changed in 2023.

To be eligible for employer-sponsored coverage, you must meet certain requirements. The employee must work a certain number of hours each week, which is called the active work requirement.

The employee must also have worked for the employer for a certain amount of time, known as the waiting period. This waiting period cannot be longer than 90 days.

You must sign up during open enrollment to get employer-sponsored coverage. If your employer, your parent's employer, or your spouse's employer offers coverage and you can get that coverage, you probably should.

Employer-sponsored coverage may affect your eligibility for tax credits on Get Covered Illinois/HealthCare.gov. If the employer-sponsored plan is considered "affordable", you won't qualify for government help through tax subsidies to reduce the premium on an individual plan.

Here's how affordability is determined:

If the employer-sponsored plan is not affordable, you may qualify for tax subsidies to get a plan on Get Covered Illinois/HealthCare.gov.

Employers can reimburse employees for medical expenses in addition to health insurance premiums. This is a more generous offer and helps employees to be better financially prepared for unexpected health costs.

Some HRAs allow employers to reimburse employees for medical expenses, including doctor visits, copays, dental cleanings, prescriptions, eye glasses, and diabetes supplies. Employers can choose to exclude categories of expenses as long as the exclusion is applied fairly to everyone.

Employer reimbursement for medical expenses is simple with an HRA. Many of our clients reimburse employees for medical expenses in addition to reimbursing them for health insurance premiums.

Here are some examples of eligible medical expenses that can be reimbursed with a QSEHRA:

Employers can choose what they want their ICHRA to reimburse, including insurance premiums and qualified medical expenses. This gives them flexibility in designing their HRA program.

If you're in a leave without pay status, you may still need to pay for your health benefits premiums.

You'll need to pay the employee share of health benefits premiums if you're in a leave without pay status for an entire pay period. This is because your pay during that period may not cover the full amount of withholdings due.

However, you won't have to pay if your leave is short or your pay covers the premiums.

If you're in a leave without pay status, your employer must notify you of your options and provide a way for you to make direct premium payments.

Here are some groups of people who are exempt from paying premiums while in a leave without pay status:

To be eligible for premium conversion, you need to meet certain requirements. You must be an employee of the Executive Branch of the Federal Government.

If your pay is issued by an Executive Branch agency, and you're participating in the FEHB Program, you're eligible for premium conversion. This means your employer will use a portion of your pay to cover your health insurance premiums, and you'll save on taxes.

You can also be eligible if your employer agrees to offer participation in the plan, even if you're not a part of the Executive Branch. However, you must be paying both shares of the premiums, including your own share and the Government's share.

Here are the specific eligibility requirements:

Note that annuitants and compensationers are not eligible for premium conversion, unless they're reemployed annuitants who are employed in a position that conveys FEHB eligibility.

Employers can't use certain types of health insurance plans to reimburse employees for their premiums. This includes short-term limited duration plans and association health plans that don't meet the Affordable Care Act's requirements.

ICHRAs don't work with medical sharing plans, but QSEHRAs can if the employee also has a Minimum Essential Coverage plan.

QSEHRAs can reimburse for spousal employer premiums, which is a benefit ICHRAs don't offer.

Employers need to carefully choose a plan that meets the ACA's requirements to avoid any issues with reimbursing employee premiums.