Subsidized Options for Group Health Insurance in Arizona

Not every Arizona small business qualifies for—or can afford—a traditional group health insurance plan. But that doesn’t mean you’re out of options.

While most people associate “subsidies” with individual health plans on the ACA marketplace, employers can take advantage of tax-advantaged reimbursement programs that allow them to support their employees’ health coverage without the cost or complexity of a full group plan.

At AZ Health Insurance Agents, we help small employers in Phoenix, Scottsdale, Gilbert, and beyond explore affordable, flexible alternatives like QSEHRA and ICHRA—programs that function as employer-funded subsidies while keeping you compliant and competitive.

What Is a Subsidy—and Do Employers Qualify?

When most people hear “subsidy,” they think of income-based discounts on ACA marketplace health plans. But that type of subsidy applies only to individuals, not to businesses.

What Employers Can Use Instead

Small businesses generally don’t receive subsidies that reduce the premium cost of traditional group insurance—unless they qualify for a federal tax credit through the SHOP program (see our tax benefits guide).

Instead, the most effective form of “subsidy” for employers comes through Health Reimbursement Arrangements (HRAs)—programs that let businesses reimburse employees tax-free for premiums or qualified medical expenses.

These reimbursement-based strategies include:

QSEHRA (Qualified Small Employer HRA)
ICHRA (Individual Coverage HRA)

Both can function like a private subsidy system—letting you help employees pay for their coverage, without taking on the cost or risk of offering a traditional group health plan.

Next, we’ll break down each of these options and how they work for Arizona employers.

QSEHRA: A Simple Subsidy Alternative for Small Employers

If your Arizona business has fewer than 50 employees and doesn’t offer a traditional group health plan, the Qualified Small Employer Health Reimbursement Arrangement (QSEHRA) could be the simplest and most affordable way to help your team with health costs.

What Is QSEHRA?

QSEHRA is a formal IRS-approved program that allows small businesses to:

Reimburse employees tax-free for individual health insurance premiums
Optionally reimburse for out-of-pocket medical expenses
Skip the complexity and participation requirements of traditional group insurance

Who Qualifies?

To use a QSEHRA, your business must:

Have fewer than 50 full-time equivalent (FTE) employees
Not offer any group health plan
Provide the QSEHRA to all full-time W-2 employees (exceptions allowed for part-time, seasonal, etc.)

How It Works

You set an annual reimbursement cap (IRS sets annual max)
Employees buy their own individual plan
They submit proof of coverage and expenses
You reimburse them tax-free

QSEHRAs are especially useful for small employers with diverse or remote teams—and they’re easier to manage than you might expect.

ICHRA: A Scalable Reimbursement Strategy

If your business has over 50 employees—or you want more flexibility than QSEHRA allows—an Individual Coverage Health Reimbursement Arrangement (ICHRA) might be the right solution.

ICHRA gives employers the ability to offer health benefits without managing a group plan, by reimbursing employees for individual coverage in a structured, compliant way.

Key Benefits of ICHRA

How It Works

You define eligible employee classes and monthly reimbursement limits
Employees enroll in a qualified individual plan
They submit proof of coverage and/or qualified expenses
You reimburse them through payroll tax-free

ICHRA is ideal for growing businesses, hybrid workforces, or employers operating in multiple states where group plans are impractical.

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Contact Us today to speak with one of our knowledgeable health insurance agents. Let us guide you toward a healthier, more secure future.

How These Programs Compare to Group Health Plans

QSEHRA and ICHRA aren’t just budget-friendly—they also simplify administration and give employees more flexibility. But they’re not perfect for every situation.

Here’s how they stack up against traditional group health insurance:

Tax Treatment

Employer reimbursements are 100% tax-deductible

Employees receive the reimbursements tax-free if they have qualifying coverage

Same tax benefit as offering group coverage—without needing to manage a policy

Plan Flexibility

Employees choose the individual plan that fits their needs

No more trying to pick a single group policy that fits everyone

Ideal for teams with diverse ages, medical needs, or remote workers

Lower Administrative Burden

No participation thresholds or carrier underwriting

Simple monthly reimbursements rather than premium billing

Can scale with your business and employee count

But… There Are Trade-Offs

Employees must shop for their own coverage (some may find this confusing)
Offering an ICHRA can impact an employee’s eligibility for ACA subsidies
QSEHRA has annual reimbursement caps (ICHRA does not)

We help you weigh these trade-offs and choose the model that makes the most sense based on your goals, workforce, and compliance obligations

When to Consider a Reimbursement-Based Subsidy Model

QSEHRA and ICHRA aren’t for everyone—but in the right circumstances, they offer an efficient, flexible way to support employee health coverage without the cost or constraints of a group plan.

You should consider one of these models if:

Your Business Doesn’t Meet Participation Requirements

Traditional group health plans often require that 50–75% of eligible employees enroll
If many employees waive coverage due to spouses or Medicare, you might not qualify
QSEHRA and ICHRA remove that barrier entirely

Group Coverage Is Too Expensive

Premiums for small groups in Arizona can be a significant monthly expense

Reimbursing employees for individual plans often results in lower total cost

Your Employees Are Already Covered Individually

Many workers already have marketplace plans, Medicaid, or coverage through a spouse

An HRA allows you to reimburse employees who are already spending their own money

Your Workforce Is Remote or Spread Across States

Group plan networks may not span all areas your employees live in
ICHRA gives each employee the ability to select a local plan that works for them

If any of these situations apply, an HRA may be your most practical path to offering compliant, affordable coverage.

FAQs About Group Insurance Subsidies and HRA Options

Can I offer an HRA if I already have a group plan?

Not both at the same time.

If you offer a QSEHRA, you cannot also offer a group plan.
If you offer an ICHRA, it must either replace your group plan or be offered to a different employee class (e.g., remote workers vs. onsite).

Will an HRA affect employee eligibility for ACA subsidies?

Yes.

If you offer an ICHRA, employees may lose eligibility for premium tax credits on the marketplace.
The IRS has a formula to determine if your ICHRA offer is “affordable.”

We help you evaluate affordability so your offer doesn’t unintentionally cost your employees more.

What are the contribution limits for QSEHRA and ICHRA?

QSEHRA has annual IRS limits (e.g., ~$6,150 for individuals / ~$12,450 for families in 2025)
ICHRA has no contribution limit—you can set your own monthly reimbursement caps

Are reimbursements taxable to employees?

No—as long as:

The employee has qualifying health coverage
You administer the HRA according to IRS guidelines

We ensure your setup is compliant so employees receive funds tax-free

Explore Subsidy-Compatible Strategies With AZ Health Insurance Agents

If a traditional group health plan doesn’t fit your team—or your budget—QSEHRA and ICHRA offer two flexible, compliant alternatives for supporting your employees.

At AZ Health Insurance Agents, we help Arizona employers:

Not sure where to start? Contact us to speak with a licensed broker and explore which options best fit your business.