Offer health benefits on a budget you control
Set a predictable monthly allowance, and let your employees choose the individual health plans that work best for them. Alongside our partner Thatch, we’ll handle the administration.
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Give your team more choice with a
health allowance
You set the budget
Choose exactly how much to contribute towards employee premiums, so monthly costs stay predictable.
Your team picks their plan
Employees pick health, dental, and vision plans that fit their needs—all through Thatch’s guided experience.
We’ll handle the rest
Gusto and Thatch take care of onboarding, payroll deductions, compliance, and paperwork.
What makes health allowances different from small group health insurance?
Instead of picking one group plan for everyone, you set a monthly budget and your team picks the plan that fits them best. Your costs stay exactly where you set them, no matter how much healthcare your team ends up using. In some states, individual plans can even cost less than comparable group coverage.
Why small businesses choose Gusto for employee benefits
Benefits deductions happen automatically with every payroll run, saving you time, reducing errors, and eliminating the need for manual reconciliation.
A licensed advisor in your corner
At no extra cost, a health benefits advisor will help you compare plans, build a package your team will value, and answer questions along the way.
Gusto manages open enrollment, renewals, compliance, and employee life events so you can focus on running your business.
One suite of benefits, built for your team
A health allowance is one of many ways to offer great benefits through Gusto. From health insurance to dental, vision, retirement, and more, we help you build a benefits package that fits your team and your budget.
Questions? We’ve got answers.
A health allowance lets you reimburse your team tax-free for their individual health insurance, as long as they’re enrolled in a qualifying plan. You may know it as an ICHRA (Individual Coverage Health Reimbursement Arrangement), a type of HRA. The federal government recently renamed it a CHOICE Arrangement, but it works the same way.
Both are tax-free HRAs, but a QSEHRA is only for employers with fewer than 50 employees and has IRS-set contribution limits. A health allowance has no company-size limit and no cap on your contribution, and unlike QSEHRA, it lets your employees deduct any remaining premium — beyond what you contribute — pre-tax, right through payroll. The main requirement is that employees are enrolled in a qualifying individual plan.
You choose which eligible W-2 employees to offer it to. It can be offered to full-time, part-time, and seasonal workers, and tailored by employee class.
No. Unlike group plans, which often require a minimum percentage of employees to enroll, a health allowance has no participation minimums.
Reimbursements are tax-free for employees, and many employees can deduct their remaining premium dollars pre-tax.
Contributions and reimbursements run automatically through Gusto payroll, and Thatch guides employees through choosing a plan — so there’s less for you to manage.
Yes. Employees can choose not to participate. Offering a health allowance can affect whether employees qualify for premium tax credits on the Marketplace, depending on whether the allowance is considered affordable, so employees should review their options before deciding.
No. Employees need a qualifying individual health plan — short-term plans and excepted-benefit-only plans don’t count.
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