Can I Give Employees Money for Health Insurance?

Yes, you can give employees money for health insurance — but the method matters enormously for taxes. There are two main paths: a taxable stipend, or a tax-free reimbursement arrangement like an ICHRA.

A stipend is simple: you add money to payroll and employees spend it however they like. The catch is that it’s treated as wages, so both you and the employee pay tax on it — shrinking the real value of the benefit.

An ICHRA delivers the money tax-free, but with a condition: employees must buy qualifying individual health coverage and submit proof. For money that’s meant to fund health insurance anyway, that’s usually exactly what you want — and it means more of your dollars reach your employees.