With health care reform taking full effect in 2014, health reimbursement arrangements and defined contribution health benefits are expected to become a mainstream employee benefit. A Health Reimbursement Arrangement, or HRA, is an IRS approved, employer-funded, tax advantaged employer health benefit plan that reimburses employees for out of pocket medical expenses and individual health insurance premiums.
A common question about HRAs for a small business is "Can an owner participate in an HRA?" 
Employees and C-Corp Owners can Participate in an HRA
Current or former employees may participate in an HRA and receive reimbursements 100% tax-free.
Owners of C-Corporations may also participate in an HRA. However, employees who are also non-C-Corp "Owners" (e.g. sole proprietors, partners, or S-Corp shareholders that own >2% of the company's shares) may use the HRA platform but may not receive the same amount of tax benefits as non-owners. If the company is an LLC, owner participation varies based on the way the LLC files taxes (i.e. if they file taxes as a partnership, S-Corp, or C-corp).
Sole proprietors, Partners, or S-Corp shareholders that own >2% of the company's shares can use the HRA Platform to Reimburse Medical Expenses
The non-C-Corp Owners specified above may receive reimbursement from their companies for medical expenses, and they may use the HRA platform to receive and track these reimbursements. However, reimbursements made to Owners must be reported on the owners'/partners' wages (on their W-2 and 1040 forms) subject to federal income tax withholding. These reimbursements are exempt from Federal Insurance Contributions Act (FICA) and Federal Unemployment Tax Act (FUTA) taxes, similar to profits passed through to the owner. Further, the cost of the reimbursements is a deductible expense to the business, reducing the taxable income of the business and, thus, reducing the taxable income of the owners/partners (because these are flow-through tax entities).
IRS rules limit the deductibility of medical expenses for certain business owners. Using an online HRA software platform enables business owners to secure all income and payroll tax deductions to which they are legally entitled. Additionally, the online platform can track expenses to provide information needed for federal and state income and payroll tax filings.
Note that sole proprietors and other self-employed individuals receive an above-the-line tax deduction for personal health insurance premiums. IRS Notice 2008-1 (see http://www.irs.gov/pub/irs-drop/n-08-01.pdf) clarified that S-Corp owners may only take the self-employed health insurance premium tax deduction (on Form 1040) if the S-Corp pays for or reimburses the owner for the premiums.
