New HRA Tax Credit a Boon for Indiana Small Business Health Insurance

Small businesses in Indiana now have an opportunity in 2025 to receive tax credits for offering health reimbursement arrangements to their employees instead of traditional group health insurance. This move signifies a big leg up for small businesses in terms of their tax burden and their ability to recruit and retain employees. Here's what to know!

Updated 11.3.24 as more information comes in about this exciting new legislative measure in the state of Indiana. 

Indiana Small Business Health Insurance just got a lot easier

This post will cover:

• What is Indiana House Bill 1004 Health Care Matters?
• How does the Tax Credit for Small Businesses in Indiana work?
• Who is eligible for the Indiana Tax credit for HRAs?
• How much is the tax credit for HRAs?
• Are there rules regarding House Bill 1004?
• What previous benefits are required?
• What if a company already has an HRA?
• When does the HRA tax credit begin?
• How HRAs like QSEHRA and ICHRA work
• How to get started offering an HRA 
• How to choose an HRA administrator to help

Let's start with some important context.

Health Reimbursement Arrangements (HRAs) – this term has been buzzing in the health insurance industry, particularly in Indiana, but what does it mean? And why should it matter to you? Simply put, HRAs are plans funded by employers to reimburse employees for their out-of-pocket medical costs and personal health insurance premiums. These arrangements provide an impressive degree of flexibility. Plus, recent legal amendments have amplified their appeal, making them an even more compelling choice for health coverage.

Indiana has taken a huge step forward by introducing a new law that offers a tax credit for HRAs. It's a milestone move that's intended to make HRAs more enticing for both businesses and individuals alike.

This new law equates to potential savings – a win-win for everyone involved. By opting for an HRA, you're not just selecting a health coverage option; you're potentially choosing a path to a more cost-effective healthcare plan.

So, whether you're an employer looking to provide a valuable benefit to your employees, an individual seeking the best coverage option for your needs, or just a curious mind interested in health insurance trends in Indiana, you're in the right place. We're about to embark on a journey that will unpack HRAs, delve into the significance of this new law, and explore how these tax credits could shift the health insurance terrain in Indiana.

Here's to better understanding, better choices, and ultimately, better health!

About Indiana House Bill 1004, Healthcare Matters 

First of all, the Indiana House Bill 1004, Health Care Matters contains several strategies to control costs of healthcare and maximize its value for all Hoosiers and their health. Let's go over those first before we focus on our favorite part - the HRA tax credit for small businesses in Indiana. 

Here’s the high-level view.

The legislation is from Indiana House Bill 1004: House Bill 1004 - Health care matters - Indiana General Assembly, 2023 Session.

Indiana House Bill 1004:

• Establishes the health care cost oversight task force and sets forth duties of the task force.
• Provides a credit against state tax liability to certain physicians who have an ownership interest in a physician practice and meet other eligibility criteria.
• Allows a credit against the state tax liability of an employer with fewer than 50 employees if the employer has adopted a health reimbursement arrangement in lieu of a traditional employer provided health insurance plan and if the employer's contribution toward the health reimbursement arrangement meets a certain standard.
• Requires the office of the secretary of family and social services to research and compile data concerning Medicaid reimbursement rates for Indiana and all other states and the national reimbursement rate average.
• Requires the submission of a report to the health care cost oversight task force and the general assembly.
• Establishes the payer affordability penalty fund.
• Specifies additional information that a hospital must report to the Indiana department of health in the hospital's annual report and establishes a fine for a hospital that fails to timely file the report.
• Provides that a bill for health care services provided by certain qualified providers in an office setting must be submitted on an individual provider form.
• Prohibits an insurer, health maintenance organization, employer, or other person responsible for the payment of the cost of health care services from accepting a bill that is submitted on an institutional provider form.
• Repeals language requiring a hospital to hold a public forum.
• Requires the department of insurance to contract with a third party to calculate an Indiana nonprofit hospital system's prices from certain health plans for specified calendar years. Before November 1, 2024, and before November 1 each subsequent year, requires the department's third party contractor to compare certain Indiana nonprofit hospital system facility pricing information with 285% of Medicare.
• Requires the calculations to be submitted as a report for review.
• Provides that a health care provider that enters into: (1) a value-based health care reimbursement agreement; and (2) an electronic medical records access agreement; with a health plan may qualify to participate in the health plan's program to reduce or eliminate prior authorization requirements.
• Requires a health plan that establishes a program to reduce or eliminate prior authorization requirements to provide certain information to health care providers concerning the program.
• Requires a third-party administrator, insurer, or health maintenance organization that has contracted with a person to administer a self-funded insurance plan or a fully insured group plan to provide claims data to the person not later than 15 days from a request for the data.
• Specifies certain claims data to be provided and establishes a fine for a failure to timely provide the claims data.
• Requires the all payer claims data base advisory board to discuss specified issues concerning reimbursement rates.

• Allows for the provisional credentialing of physicians who establish or join an independent primary care practice.

The HRA Tax Credit for Small Businesses in Indiana from Health Care Matters

Ok, now let's jump to the HRA tax credit, arguably the most compelling part of the legislation for Indiana Small Business owners looking to control their health insurance costs or offer benefits for recruitment and retention.

As Individual Coverage HRAs are gaining popularity across the country, Indiana lawmakers have taken notice of the benefits of ICHRAs for small businesses and have taken steps to help them implement these individual coverage health reimbursement arrangements.

As a reminder, an Individual Coverage HRA (ICHRA for short) is a tax-advantaged benefits solution that allows employers to reimburse their employees for health insurance rather than buying it for them. A proven recruitment and retention tool, ICHRA is trending among small businesses in the state of Indiana. An ICHRA is a type of HRA (health reimbursement arrangement).

As part of the latest legislative session, the state has introduced a tax credit for employers with less than 50 full-time workers who offer ICHRAs, which will be available for two consecutive years.

This move is aimed at supporting small businesses in Indiana by easing their tax burden and enabling them to attract and retain employees more effectively.

Indiana's Tax Credits for HRAs 

In a remarkable stride towards encouraging health insurance affordability and accessibility, Indiana has introduced a new law allowing tax credits for HRAs. This legislative change is a significant breakthrough and holds potential to make HRAs even more attractive to employers and employees alike in Indiana.

This new law specifically incentivizes businesses to offer HRAs by offering them a tax credit. Essentially, businesses that implement an HRA for their employees can now lower their overall tax liability, making it a financially appealing strategy for companies seeking to provide health benefits to their staff.

An added bonus? On top of the tax credit, the reimbursements made through the HRAs are also tax-advantaged and not considered income. 

But the benefits of this law are not confined to the employer side. For employees, this could translate to more businesses offering HRAs, potentially leading to increased choice and lower costs for health insurance. As HRAs allow employees to choose a health insurance plan that best fits their personal needs and lifestyle, this tax incentive could indirectly promote greater health insurance coverage and flexibility for the Indiana workforce.

Indiana's new law facilitating tax credits for HRAs is a milestone legislation that underlines the state's commitment to promoting accessible, affordable, and flexible health coverage for its residents. By incentivizing HRAs, Indiana is not only boosting businesses' capability to offer employee health benefits but also paving the way for workers to attain optimal health insurance tailored to their needs.

HRAs, especially when combined with the competitive individual insurance market and a tax credit, make it easier than ever to find affordable, high-quality health insurance in Indiana. 

If you're new to offering benefits, see how much could you be saving with HRAs. Check out our Tax Savings Calculator and find out!

How does the Tax Credit for Indiana Small Business Health Insurance work?

Small businesses in Indiana with less than 50 employees can receive a state tax credit if they offer a health reimbursement arrangement instead of traditional group health insurance, as long as their contribution meets certain standards. This encourages employers to provide cost-effective healthcare options for their employees and helps alleviate their tax burden.

What makes this legislation so great is its ability to incentive small companies to offer their employees affordable healthcare, even if they aren't legally required to. It's a critical step in making healthcare more accessible and affordable in the state of Indiana.

Here is a quick glance straight from the text:

Section 2: Health Reimbursement Arrangement Credit (Effective January 1, 2024)
-Applies to a qualified taxpayer defined as a corporation, LLC, partnership, or another entity that has any state tax liability (adjusted gross income tax, financial institutions tax, insurance premiums tax, or nonprofit agricultural health coverage tax) and has adopted a health reimbursement arrangements (HRA) as described in the Internal Revenue Code in lieu of a traditional employer provided health plan. 

Indiana Health Care Matters HRA Tax Credit FAQs

We've been fielding an amazing about of questions about Indiana Health Care Matters and its HRA tax credit for Indiana Small Businesses. Here are a few of the most common questions.

How much is the tax credit?

Employers can claim up to $400 per employee for the first year and $200 per covered employee in the second year. So if you had 49 employees, that would be up to $19,600 for year one and $9,800 in year two. The bill does include some parameters for this; the state will not approve HRA tax credits when the total credits approved equals $10,000,000 in any state fiscal year.

A few other key points here:

• The credit received may not exceed the state tax liability of a qualified taxpayer.
• If the amount of a credit exceeds a qualified taxpayer’s state tax liability for a particular year, the qualified taxpayer may carry the excess over to the immediately succeeding taxable years
• The credit carryover cannot be used for a period exceeding ten years after the date that the initial credit was made
• The amount of a credit carryover shall be reduced to the
  extent that the carryover is used by the qualified taxpayer
  to obtain a credit for any subsequent year
• A qualified taxpayer is not entitled to a carryback or refund of any unused credit

Are there reporting requirements?

Glad you asked. Yes, there are reporting requirements for Indiana House Bill 1004. 

• A qualified taxpayer claiming the credit must report to the department of insurance every three years.
• This report must state whether or not the company continued with the HRA or reverted back to traditional health insurance.
• If the company continues with the HRA, the report must indicate the amount of the benefit
• Credits must be claimed on the qualified taxpayers state tax return in the manner instructed by the department 

What to know about the approval process for Indiana House Bill 1004

• The department of revenue will record the time of filing of each return
  claiming an HRA credit and will approve claims in the order in which they were received.
• The department may not approve a claim for an HRA credit after the date on which the total credits approved equals $10,000,000 in a state fiscal year.

Who is eligible for the Indiana Tax credit for HRAs?

Small businesses are eligible if:

• The company has fewer than 50 employees.
• The company is a qualified taxpayer defined as a corporation, LLC, partnership, or another entity that has any state tax liability (adjusted gross income tax, financial institutions tax, insurance premiums tax, or nonprofit agricultural health coverage tax.
• The company has adopted a health reimbursement arrangement of equal or greater value to their previous benefits solution or in lieu of traditional employer sponsored health insurance.
• The employer's contribution toward the health reimbursement arrangement meets certain standards and is equal to the contribution from the previous group plan or previous benefit level (that would include a small business not historically offering any health benefits).

What makes the company a qualified taxpayer?

For tax eligibility, here's some extra context straight from the source. 

Sec. 3. As used in this chapter, "state tax liability" means a qualified taxpayer's total tax liability that is incurred under:

(1) IC 6-3-1 through IC 6-3-7 (the adjusted gross income tax);

(2) IC 6-5.5 (the financial institutions tax); and

(3) IC 27-1-18-2 (the insurance premiums tax) or IC 6-8-15

(the nonprofit agricultural organization health coverage tax); as computed after the application of the credits that, under IC 6-3.1-1-2, are to be applied before the credit provided by this chapter.

What benefit types from the previous year qualify?

Small business in Indiana can claim this tax credit if their 2025 HRA offer is greater than or equal to the level of benefits they provided in the previous year. 

But what does that really mean? 

Say a small business didn't offer benefits in 2024, given that they aren't legally required to. If they signed up for an HRA to offer their employees for 2025, that means they have increased their benefit offering year over year. In other words, they went from no benefits to an HRA. 

In another example, perhaps a small business had a small group health plan in 2024 but is now planning to offer their employees an HRA of greater value to their employees for 2025. That would mean that employees would face less of a financial burden for their healthcare, making that company eligible for the tax credit.

In summary, if a company didn't offer benefits previously, or offered a small group plan the previous year, and is now offering an HRA of greater value, they are eligible for the tax credit available through Health Care Matters.

Again, here's what the full text says.

Sec. 4. Subject to section 7 of this chapter, a qualified taxpayer may claim a credit against the qualified taxpayer's state tax liability for a qualified contribution for a qualified taxpayer with less than fifty (50) employees, up to four hundred dollars ($400) in the first year per covered employee if the amount provided toward the health reimbursement arrangement is equal to or greater than either the level of benefits provided in the previous benefit year, or if the amount the employer contributes toward the health reimbursement arrangement equals the same amount contributed per covered individual toward the employer provided health insurance plan during the previous benefit year. The credit under this section decreases to two hundred dollars ($200) per covered employee in the second year.

What if I already have an HRA in Indiana?

We're already getting this question a lot given our growing number of Indiana clients. If you're already on our platform or another HRA administrator platform, we believe that simply raising your monthly allowance and documenting that for tax purposes will make you eligible for this tax credit. The legislation is a little cloudy on this point but we will update this blog post as soon as we have more context.  

When does the HRA tax credit begin?

The bill went into effect on January 1st, 2024. 

Want to see if this tax credit could help your business? Click the green button below.

What is the individual health insurance market like in Indiana?

Indiana is a market ripe for ICHRA adoption due to its vibrant and competitive individual health insurance market. There's increasingly more choices, more competition, and lower prices.

In the past three years, the number of carriers offering ACA-compliant individual plans in the state has tripled from two to six. In addition, individual plan premiums are generally lower than small group plans throughout the state.

Indiana's individual insurance market distinguishes itself through a notably competitive environment. This competition is particularly advantageous for small businesses and HRAs, fueling a wide variety of plans that cater to diverse needs and budgets. 

This marketplace teems with numerous insurance providers, each offering a unique array of plans with various premiums, deductibles, out-of-pocket maximums, and covered services. This competitive landscape not only broadens your selection but also ensures competitive pricing, making affordable health insurance in Indiana accessible to more small businesses.

The dynamism of Indiana's individual insurance market goes hand in hand with the flexibility of HRAs, which allow small businesses to set their budget and offer health benefits without the need for a traditional group health plan. Employees, on the other hand, can choose a plan from the open market that best suits their personal needs and potentially have their premiums and medical expenses reimbursed by their employer.

What insurance can my employees buy if I offer them an HRA? 

Indiana has an increasing number of options for insurance on the individual market. Indiana health insurance companies include: Aetna, Ambetter, Anthem Blue Cross Blue Shield, CareSource, Cigna, US Health & Life. With the right ICHRA administrator, employees will be walked through the process of determining which health plan is best for the needs of their family.

Best Health Insurance in Indiana

Here are the main types of health insurance in Indiana. 

• Employer-sponsored Health Insurance: Many Hoosiers receive health insurance through their employers. These plans typically cover a range of healthcare services and may also offer additional benefits such as wellness programs. For small businesses, it's not uncommon for these to be out of reach financially.
• Individual Market Health Insurance: If you don't have access to employer-sponsored insurance, you can purchase health insurance on the individual market. The Indiana marketplace offers several plan options from different insurers, allowing you to find the best health insurance in Indiana that fits your needs and budget.
• Medicaid: Indiana's Medicaid program, known as the Healthy Indiana Plan (HIP), provides coverage to low-income adults who meet certain eligibility requirements.
• Medicare: This is a federal program that provides health coverage for individuals aged 65 and older or with certain disabilities.
• Health Reimbursement Arrangements (HRAs): With the recent changes in Indiana law, HRAs are becoming an increasingly popular option. 

Harnessing the Power of Indiana's Competitive Insurance Market: A Win-Win for Business Owners and Employees

The competitive landscape of Indiana's open insurance market is a boon for both business owners and employees, creating a vibrant marketplace teeming with diverse health insurance plans. There's an abundance of Bronze, Silver, Gold, and Platinum Plans with various balances of monthly premiums and out-of-pocket costs. The market's extensive range of options caters to unique needs and budgets.

This bustling competition among providers plays into the hands of businesses and their workforce alike. Insurance companies, vying for customers, aim to offer the most appealing plans at the most competitive prices. This fierce rivalry promotes affordability and variety, making it easier for businesses and their employees to find cost-effective health insurance options in Indiana.

You can compare individual plan rates with their small group plan counterparts in our handy interactive map. 

Exploring the open market allows businesses and individuals to compare coverage details and costs side by side. Businesses can assess which plans align best with their budget and desired level of employee benefits. Employees, on the other hand, can choose plans based on personal healthcare needs, financial circumstances, and preferred healthcare providers. This comparison shopping fosters informed decision-making, ultimately guiding all parties toward a plan that delivers the best value.

The New Era of HRAs: A Transformative Approach to Health Insurance in Indiana

HRAs represent a breakthrough in healthcare financing that is reshaping how businesses and their workforce navigate health insurance. It brings to the table an array of benefits and an unparalleled level of flexibility. More than just a new player in the game, HRAs are a breath of fresh air, delivering a transformative impact to the health insurance landscape. It's a fresh chapter in health coverage that's enriching the lives of countless people across Indiana.

HRAs are employer-funded accounts that are used to reimburse employees for out-of-pocket healthcare expenses, including premiums for health insurance policies. Unlike traditional group health plans, HRAs give employees the freedom to choose the health care services and insurance plans that best fit their needs.

Individual Coverage HRAs (ICHRA) and Qualified Small Employer HRAs (QSEHRA)

Two types of HRAs making waves in the healthcare industry are Individual Coverage HRAs (ICHRA) and Qualified Small Employer HRAs (QSEHRA). These two types of HRAs are transforming the way businesses approach health benefits, offering a higher degree of flexibility and personalization for both employers and employees. Let’s take a look at each one: 

Individual Coverage HRAs (ICHRA): ICHRAs allow employers of any size to reimburse employees tax-free for individual health insurance premiums and other medical expenses. With an ICHRA, employers can set their budget and define the employees' eligibility.

Qualified Small Employer HRAs (QSEHRA): These are available to businesses with fewer than 50 employees that don't offer a group health plan. Like ICHRAs, QSEHRAs can reimburse employees for individual health insurance premiums and medical expenses, but they have annual contribution limits.

The Advantages of Switching to HRAs: Maximizing Coverage and Minimizing Costs

The transition to HRAs marks a new chapter in healthcare financing, offering employers and employees alike a fresh approach to health insurance.

This approach doesn't just match the coverage offered by traditional health plans—it often surpasses it, and for less cost. 

HRAs: More Coverage for Less 

How can HRAs provide more coverage for less? The secret lies in their structure and flexibility. Unlike traditional group health insurance, where everyone is essentially placed into the same plan, HRAs allow employees to choose the plan that best fits their individual needs and lifestyle. 

Employees can shop for their insurance, perhaps finding more affordable options in the open market than what a group health plan might offer. With HRAs, the unused funds can be rolled over to the next month, providing a layer of financial safety and promoting cost-effective healthcare choices.

{Read more about HRA account rollover}

The Win-Win of HRAs for Employers and Employees 

When businesses switch to HRAs, they aren't just adopting a new system—they're embracing a solution that creates a win-win scenario for both them and their employees (and don't forget that Indiana tax credit and the tax savings that come along with it!)

For Employers

• Cost Control: HRAs allow employers to set a defined contribution rather than being subject to the potentially rising costs of traditional health insurance premiums.
• Administrative Simplicity: With the right HRA administration partner, managing an HRA can be simpler than administering a traditional group health plan.
• Recruitment and Retention: Offering an HRA as a health benefit can attract and retain top talent, especially with the added tax benefits now offered in Indiana.
• Tax credit for HRA for two years
• Tax savings (reimbursements are tax-free)

For Employees

• Choice: HRAs give employees the flexibility to select the health insurance plan that best meets their needs and those of their families.
• Value: By selecting a plan that specifically suits their lifestyle, employees can often get more value for their money.
• Security: HRAs provide a sense of security, knowing that out-of-pocket healthcare costs and premiums can be reimbursed.

With all these advantages, it's no wonder more and more businesses in Indiana are considering the switch to HRAs. But, implementing an HRA can seem daunting without the right guidance. That's where choosing an experienced HRA administration partner like Take Command becomes vital. 

Choosing Take Command: Your Trusted HRA Administration Partner 

As with any significant change in your business, transitioning to HRAs requires guidance, expertise, and seamless administration. That's where Take Command steps in, your dedicated partner in navigating the world of HRAs. 

Take Command is more than just an HRA administration service; we’re a partner committed to making your HRA journey as straightforward and beneficial as possible. With a proven track record in managing HRAs, we're dedicated to providing comprehensive HRA solutions for businesses of all sizes. 

Here's what sets Take Command apart as an HRA administration partner:

• Expertise: With extensive experience in HRA management, Take Command is well-versed in the intricacies of setting up and managing HRAs.
• Full-Service Administration: From setup to ongoing management, we handle every aspect of your HRA, ensuring compliance with state and federal laws.
• Employee Education: We provide resources and support to help your employees understand their HRA and make informed health insurance decisions.
• Personalized Support: Our team is always ready to assist, providing personalized support for your business and your employees.
• Cost-Effective: With our affordable pricing model, the cost of our services is often offset by the savings you'll enjoy from implementing an HRA.

Take Command stands out as the best choice for businesses in Indiana because we understand your unique needs and the landscape of health insurance in the state. With the new law offering tax credits for HRAs, our team is ready to help you maximize these benefits while ensuring that your HRA aligns with your business objectives and employees' needs.

→ Read our customer success stories

Take Command makes the transition to HRAs simple, efficient, and cost-effective, proving to be a pivotal partner in your journey towards better, more affordable health insurance. 

Ready to take the next step? Reach out to us and explore how we can help you take command of your health insurance today!

Embracing the New Era of HRAs for Health Insurance in Indiana

We've journeyed through the landscape of health insurance in Indiana, unraveling the myriad of options and, notably, the transformative approach of HRAs. We've seen how Indiana's recent law, introducing tax credits for HRAs, amplifies the appeal of this already promising health coverage strategy. 

By embracing HRAs, businesses can offer employees personalized, affordable health coverage that aligns with their individual needs and lifestyle. Employees gain the flexibility to choose their insurance plans and benefit from potentially lower costs and robust coverage. Meanwhile, employers control costs, simplify administration, and strengthen their benefits package. 

But, unlocking these benefits doesn't have to be a complex task. With Take Command as your trusted HRA administration partner, you can navigate the HRA landscape with ease and confidence. From setting up your HRA to ongoing management and employee education, we stand by your side every step of the way.

In an era where health insurance is as crucial as ever, let's explore the potential of HRAs together. With the right partner and strategy, affordable, personalized health insurance isn't just a possibility—it's a reality within reach. Let Take Command guide you on this transformative journey toward optimal health coverage for your business and employees.

Indiana Small Business Health Insurance Tax Credit for HRAs: Key Points and Takeaways 

As we've navigated the landscape of health insurance in Indiana and the advent of HRAs, here are the crucial points and takeaways to remember:

• Health Insurance in Indiana: The state's competitive individual insurance market offers a variety of plan options to cater to diverse needs and budgets, making it easier for businesses and individuals to find affordable health insurance.
• Health Reimbursement Arrangements (HRAs): HRAs are employer-funded accounts that reimburse employees for out-of-pocket medical expenses and personal health insurance premiums. They offer flexibility, allowing employees to choose the insurance plan that best suits their needs.
• Types of HRAs: Individual Coverage HRAs (ICHRA) and Qualified Small Employer HRAs (QSEHRA) are two prominent types of HRAs. ICHRAs are available to employers of any size, while QSEHRAs are tailored for businesses with fewer than 50 employees that do not offer a group health plan.
• New Law in Indiana: Indiana's new law allows businesses to obtain a tax credit for providing HRAs. This legislation enhances the benefits of HRAs, making them an even more attractive option for businesses.
• Benefits of Switching to HRAs: Transitioning to HRAs can provide the same level of coverage for less, offering benefits for both employers (cost control, administrative simplicity, recruitment and retention) and employees (choice, value, security).
• Take Command as Your HRA Administration Partner: Take Command offers comprehensive HRA administration services, including setup, ongoing management, employee education, and personalized support. Our expertise and affordable pricing make us an ideal choice for businesses in Indiana considering the switch to HRAs. 

By understanding these key points, you can make informed decisions about health insurance coverage that align with your or your business's unique needs and goals.

This post has been updated for the 2025 plan year.