Small businesses want to offer group health coverage, but many are being priced out of the health insurance market. Costs continue to rise, making coverage harder for smaller employers to sustain. That’s the problem Connecticut Governor Ned Lamont is trying to solve. He recently introduced a bill to provide small employers with tax credits to incentivize the use of Health Reimbursement Arrangements.
And Connecticut is not alone. Across the country, states are moving in the same direction. Indiana enacted the first HRA tax credit in 2024 with bipartisan support. Momentum is building in several other states.
What is a Health Reimbursement Arrangement?
An HRA allows employers to set a fixed budget to reimburse employees for health insurance and medical expenses. This allows small businesses unable to afford small business group plans with another option to provide benefits to their employees. More than 80% of employers offering an HRA in 2025 did not previously provide their employees with health insurance. In other words, HRAs are helping expand access to coverage, not replacing existing plans. Instead, HRAs allow employees to choose the plan that works best for them in the broader individual market.
Movement in Illinois
In February, Illinois Senator Chris Balkema introduced a bill that provides a two-year tax credit to businesses that offer their employees an HRA. The credit is worth $400 per employee in year one and $200 per employee in year two. Senator Balkema’s proposal is a practical step Illinois can take today.
Yesterday, the SBAC’s Aidan Boleyn-Fitzgerald testified in support of this important legislation before the Illinois Senate Revenue Committee. He was joined by Rebecca Considine, the co-owner of Speed Pro Chicago Loop, who talked about the significant impact this legislation will have on her small business and employees. Senator Balkema championed the bill, which has strong bipartisan support, at the hearing.
Illinois lawmakers have an opportunity to give small businesses a more affordable way to offer health coverage. Reach out to get involved in our effort to make this tax credit a reality.