For many small and medium-sized businesses (SMBs), offering a traditional group health plan is an expense it simply can't afford. Luckily, other more affordable and flexible options make offering health coverage possible.
A common question we get from SMBs is, “Can I offer employees a stipend instead of health insurance?”
The short answer is yes—some employers can provide workers with a health insurance stipend to help pay the cost of an employee's individual health insurance premiums. However, depending on the size of your organization, a stipend may not comply with federal law. Business owners should also be aware of the tax implications of a health insurance stipend versus a tax-free reimbursement plan like a health reimbursement arrangement (HRA).
In this article, we'll review taxable health stipends and tax-free reimbursement plans as alternatives to traditional group health insurance coverage so you can decide which is best for your organization.
