As health care costs keep climbing, many individuals who buy their own coverage feel the strain. If your nanny is one of them, you can help.
Contributing to their health insurance is a meaningful way to strengthen their total compensation. It can boost job satisfaction and retention — and it shows you care about their well-being, not just the hours they work.
Understanding nanny health insurance options
There are a few different ways that household employers can help household employees with health insurance:
Employer-sponsored nanny health insurance plans
One way to provide health insurance to your nanny is to offer coverage through the Small Business Health Options Program (SHOP). This is a program that helps small businesses (including household employers) access and offer health insurance plans for their employees.
To purchase SHOP insurance, you generally must have 1 to 50 employees. You can check your eligibility here. If eligible, you can start offering coverage to your employees any time of year. Prices can vary greatly based on your geographic area, so it is a good idea to check out current prices in your area. To enroll, you can contact an SHOP agent, broker, or insurance company in your area to explore plans. They can help you learn more and get set up with something that is a good fit for your situation.
Nanny health insurance stipend
Another option for helping your nanny with their insurance costs is to offer them a stipend in addition to their regular wages. A stipend is a set amount of money that you agree to give them at a regular cadence, documented in your employee agreement. This money is considered to be regular taxable wages.
If you are giving your nanny a health insurance stipend, you cannot require proof of insurance or proof of medical expenses, or you may be in violation of IRS rules regarding Employer Payment Plans. The money is simply extra funds you are providing that your employee may choose to use to help with insurance if they would like. An advantage of this arrangement is that it allows your nanny the most flexibility to choose whatever health coverage works best for their own unique situation, without oversight from you as an employer. This could include an ACA plan, family member’s coverage, or no coverage at all.
Tax-advantaged health benefits
One of the most attractive options when it comes to supporting your nanny’s healthcare is offering a Healthcare Reimbursement Arrangement (HRA). An HRA allows you as an employer to reimburse your household employee for their health insurance premiums and other eligible healthcare costs tax-free, as long as you follow certain rules. There are two types of HRAs that you may offer, each with its own advantages and disadvantages.
Qualified Small Employer Health Reimbursement Arrangement (QSEHRA)
A QSEHRA is a type of HRA that is designed for employers with 1 to 49 employees who want to provide a set reimbursement for eligible healthcare expenses tax-free. If you have multiple household employees, they must all receive the same reimbursement. A QSEHRA has annual limits for how much you can reimburse. In 2026 these limits are $6,450 for an individual and $13,100 for a family.
Before the beginning of the calendar year, you will need to decide how much you are willing to contribute towards your nanny’s health insurance costs per month. Your nanny must provide you with receipts for their eligible expenses each month, and all reimbursements will be reported on their Form W-2. It’s possible for your nanny to have both a QSEHRA benefit and a premium tax credit in the Marketplace, but the tax credit will be reduced by the amount of the QSEHRA benefit.
Eligible expenses typically covered under a QSEHRA include:
- Health insurance premiums
- Dental insurance premiums
- Vision insurance premiums
- Co-pays
- Prescriptions
Individual Coverage Health Reimbursement Arrangement (ICHRA)
ICHRAs are similar to QSEHRAs, as they are also arrangements that allow you as an employer to reimburse your employees for eligible healthcare costs tax-free. But there are a few key differences: There is no restriction on how many employees you can have, and there is no contribution limit. Additionally, if you have multiple household employees, you can offer different reimbursement amounts for different roles. Unlike QSEHRAs, your household employees cannot receive any marketplace tax credits with an ICHRA.
HRAs have the distinct advantage of being a way to give your nanny tax-free funds for their healthcare. But they do come with more responsibilities as an employer, as they are governed by the ACA and ERISA, so you must be sure to follow the necessary rules if you enter into one of these arrangements.
Pros and cons of nanny health insurance options
Is paying for your nanny’s health insurance tax deductible?
There are some potential tax savings for you as an employer, depending upon how you go about paying for your nanny’s health insurance premiums or other eligible healthcare costs.
Tax savings available with SHOP plans
If you decide to offer a plan to your nanny via SHOP, you may qualify for the Health Insurance Tax Credit for Small Employers. This is a credit available to small employers (fewer than 25 full-time equivalent employees) whose employees annual wages are less than $62,000 and who pay a uniform percentage for all employees equal to at least 50 percent of the premium cost of employee-only insurance coverage. This is a sliding scale credit that can go up to 50 percent of the amount you as an employer spent on premiums.
Tax savings available with HRAs
HRAs are tax-advantaged, meaning you and your nanny will see tax savings if you provide a reimbursement instead of a stipend. Reimbursements for qualified medical expenses can be excluded from your nanny’s gross income and are tax free.
How much should you budget for nanny health insurance?
How much you would like to contribute depends on your budget and your nanny’s unique healthcare needs. Typical nanny medical insurance premiums vary by location. On average, in 2025 individual ACA plans cost $380 to $510 per month.
Best practices for supporting your nanny’s healthcare
When you are looking to help out with your nanny’s health insurance, it is smart to make sure you do a few things to keep you both safe.
Create a clear written agreement
Just like your employment agreement, make sure you create a specific document to outline exactly what is happening with any and all nanny medical insurance costs. The agreement should define who is responsible for premium payments, how those premiums will be paid, if any costs other than premiums are covered, conditions for continued benefit, and termination clauses.
Useful tip: Find free contract templates and state-specific nanny rules here.
Be transparent about what benefits you are offering
Be clear in your communication so your nanny understands the specifics of what you are offering. For example, if you are offering a stipend, be sure they are aware that it is taxable income. If you are offering an HRA, be sure they understand who pays for the premium, what proof is needed, and how to stay compliant. If you are offering a plan through SHOP, be sure they understand how to enroll and pay for it.
Keep proof and documentation
Maintain appropriate records of all healthcare you offer for the IRS. If you offer a plan that might qualify you for a tax credit, this is of even more importance.
Where your nanny can find a health insurance plan
If you are going to offer a stipend or HRA, it’s important that your nanny be able to find and enroll in a health insurance plan that works for them.
ACA marketplace
The ACA marketplace can be found at healthcare.gov. It’s a tool that allows individuals searching for insurance to shop for plans in their area. All plans offered on the marketplace are considered “ACA compliant,” meaning they have certain minimum essential coverage.
Before shopping, your nanny will be asked some questions about their income to help determine their eligibility for government subsidies. They have to disclose if you are reimbursing them for healthcare costs and how much the reimbursement will be, as this can impact their eligibility.
Private market insurance companies or brokers
Another option is for your nanny to engage with an insurance broker, who can help them find a plan that suits their needs. They may also shop with insurance companies directly if they so choose.
Conclusion
Offering to help your nanny with their health insurance coverage shows you care about their well-being and want to help them stay healthy. If you want to attract and retain exceptional talent, paying for healthcare costs is a great way to do that.
If you are ready to help your nanny with their healthcare, take the next step and decide what type of arrangement might work for you. If you need help with comparing your options or getting things set up, it is always a good idea to consult with a local benefits advisor as well. It is never too late to start offering extra support to your household employees.
Need help managing your nanny-related documentation or understanding available tax savings? Poppins Payroll can help with all your documentation and questions:
- Our Boulder-based team answers 98% of calls in under 15 seconds
- Quarterly state and federal tax filings for active customers
- Communication with tax agencies
- Year-end documentation (Schedule H and W2) for active customers
Get started with Poppins Payroll for free and see how it works for your household payroll needs.
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