Tax Credits for ICHRAs: A Game-Changer for Small Business Health Benefits
The health benefits landscape for small and midsize businesses (SMBs) has long been plagued by sky-high premiums, limited plan options, and overwhelming complexity. For many employers, offering traditional group health insurance has become unsustainable — and for employees, coverage often falls short of expectations.
In response to this growing crisis, several states are taking action by incentivizing a modern, flexible solution: the Individual Coverage Health Reimbursement Arrangement (ICHRA). New legislation in states like Indiana, Texas, Georgia, and Ohio introduces tax credits for SMBs that adopt ICHRAs, offering a much-needed boost for businesses looking to offer meaningful, affordable benefits.
Here’s what these new state-level incentives look like:
Indiana
Beginning in 2024, Indiana’s legislation offers a tax credit to businesses with 50 or fewer employees, including corporations, LLCs, and partnerships.
- Year 1: $400 per covered employee
- Year 2: $200 per covered employee
This straightforward incentive is designed to offset initial costs and encourage long-term adoption of ICHRAs.
Ohio
This bill has been introduced in Ohio and under it, a $400 tax credit per employee covered will be available to employers who:
- Have 2-50 employee
- Offer ICHRAs to all or some of their employees; and
- Contribute at least $400 per employee to the ICHRA in a taxable year
Texas
Set to take effect in 2026, Texas’s program provides a sales and use tax refund or franchise tax credit for small businesses (1–50 employees) that switch from traditional health insurance to an ICHRA.
- Up to $400 per covered employee annually
- Eligibility requires that the employer contribute at least as much to the ICHRA as they previously did to their group plan.
Applications for the credit will open in January 2027.
Georgia
Georgia’s legislation targets the smallest businesses — those with 10 or fewer employees — and includes a minimum contribution amount of $100/month per employee
Credit structure:
- $600 per employee (Years 1–3)
- $400 (Year 4)
- $200 (Year 5)
This 5-year incentive aims to reward consistency while easing small employers into the ICHRA ecosystem.
As more states move to embrace ICHRAs, it’s clear that this model is gaining traction not just as a cost-saving tool, but as a path to more flexible, employee-centered health coverage.
Looking forward
At Gravie, we make ICHRAs work. Whether you’re transitioning from a traditional group plan or starting from scratch, our all-in-one platform simplifies every step — from plan design and employee onboarding to ongoing support. Our licensed Gravie Care team handles the details so you can focus on running your business, not managing benefits.
With growing state support and rising adoption nationwide, ICHRAs are poised to become a mainstream option for SMBs. And as more states consider similar tax credit programs, Gravie will be here — ready to help you take advantage of the opportunities and offer competitive, affordable health benefits your team will appreciate.
Want to learn more? Get in touch with our experts who can tell you more about the tax credits, ICHRAs and other solutions we offer!