Self-Employed and Small Business

A health reimbursement arrangement (HRA) lets an employer reimburse employees for individual health insurance premiums and qualifying medical expenses on a tax-free basis under IRC Section 105. Two designs dominate for small businesses and pass-through entity owners: the qualified small employer HRA (QSEHRA), which is statutory and capped, and the individual coverage HRA (ICHRA), which is regulatory and uncapped. The right choice depends on employer size, workforce composition, and how much design flexibility matters. Neither arrangement requires the employer to sponsor a group health plan, which is the central appeal of both. Readers should confirm current contribution limits and ACA interaction rules on IRS.gov, as figures adjust annually and ICHRA rules in particular carry regulatory rather than statutory footing.

Health insurance tax rules for self-employed individuals and small businesses involve a cluster of IRC sections, entity-specific rules, and benefit arrangement types that interact in ways that are easy to misapply. This glossary defines the core terms used across this topic area - from the deduction mechanics under section 162(l) to the structural differences between a QSEHRA and an ICHRA - so the rules can be applied consistently. Terms are defined at a principle level; readers should confirm current dollar limits and eligibility thresholds against IRS publications and official guidance, as these figures adjust periodically.