A health insurance solution for employees in multiple states

April 9, 2020
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In today’s environment, it's common for large and small organizations alike to expand across state lines or hire remote, out-of-state workers. Organizations in this position are able to hire the best talent in the country regardless of where they live. This also brings new HR complexities. For example, companies with employees in multiple states often face obstacles when it comes to finding health insurance coverage.

There is a health insurance option that helps solves many of the challenges faced by companies with employees in multiple states: the health reimbursement arrangement (HRA).

What is it? Let’s dive in.

Health Insurance Challenges for Businesses with Employees in Multiple States

For employer's with employees in multiple states, here are common health insurance challenges we hear about every day.

  • “Our company does not qualify for a group health insurance policy because of participation requirements or state-specific insurance regulations.”

  • “Our company has out-of-state employees who do not qualify for the company’s insurance plan, but the company would like to help with their insurance costs, as we do for other employees.”

  • “Our employees all say they have their own personal coverage and would prefer to keep it - especially if the company could contribute to the cost.”

  • “We tried the SHOP Marketplace, but there were simply too many multi-state hurdles to secure coverage.”

A Health Insurance Solution for Employees in Multiple States

There are a few options for businesses with employees in multiple states.

However, the best one solves all of these challenges with a simple, effective benefits solution: a health reimbursement arrangement (HRA) offered to all or some of the company’s employees. In other words, businesses can offer employees tax-free reimbursement of individual health insurance premiums - up to an allowance amount determined by the company.

Reimbursing individual health insurance through an HRA is an effective solution for multistate companies because:

  • The reimbursement plan may be offered to some or all employees based on location, job role, hours worked weekly, or participation (or non-participation) in the company’s group health insurance policy.

  • Different benefit allowances may also be offered based on the employee classifications list above. For example, employees in California could receive a different allowance amount than employees in New York.

  • With a reimbursement plan, there are no minimum participation requirements.

  • With a reimbursement plan, there are no minimum contribution requirements.

  • Employees purchase and manage the plan of their choice, from local carriers and provider networks.

  • Reimbursement amounts issued through a formal defined contribution plan are tax-free to employees and tax-deductible to the company. To ensure compliance, and to make administration painless, most companies use HRA administration software.


A boutique marketing and design firm has 10 W-2 employees. Four managers are located in California with six associates spread out in Washington, Oregon, and Colorado.

After running into a dead end with purchasing a small group health insurance policy, the business decides to offer an HRA. Using employee classes, they offer $300/month to the four managers located in California and $250/month to the six associates working in Washington, Oregon, and Colorado.

In this example, each employee purchases coverage on their own via their state health insurance exchange, a broker, online, or directly from a carrier. This gives employees access to the specific doctors and level of coverage they prefer. Then, employees use their employer-funded HRA to be reimbursed for their premium, up to the amount available in their balance.

4 Simple Steps To Offer an HRA

This approach to health benefits may sound different. As such, companies may have questions about how to set it up. There are four simple steps.

Step 1 - Determine which employees will be eligible for the reimbursement program.

Step 2 - Work with an HRA provider like PeopleKeep to create the plan and enroll employees.

Step 3 - Educate employees on how the benefit works.

Step 4 - Utilize online HRA software to reimburse employees and manage the benefit.


Companies with employees in multiple states face challenges when it comes to offering employees health insurance coverage. One solution is to offer an HRA - also known as individual health insurance reimbursement - to some or all of the company’s employees. By reimbursing premiums, instead of paying them, the company can offer competitive and flexible health benefits to employees working in multiple states.

Editor's Note: This post was originally published in April 2014 with updates in 2020.

What questions do you have about health insurance solutions for employees in multiple states? What challenges or solutions have you come across? Leave a question or comment below.

Download the free guide.
Everything you need to know about the small business HRA reimbursement plan.
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