Most firms I talk to have the same shape: two or three partners, a couple of associates, and paralegals and a legal secretary holding the place together. Every one of those people is treated differently for health insurance, and the difference comes down to one question the tax code asks: is this person an employee of the firm, or an owner of it?
Who the law firm can cover
Associates and staff on a W-2 are employees. They can be offered a group plan, a QSEHRA or an ICHRA, and the firm deducts what it pays.
Equity partners are not. In a partnership or an LLP taxed as one, a partner who receives a K-1 is self-employed, so the firm cannot put partners into the QSEHRA or ICHRA it offers staff. If the firm pays a partner’s premium, that payment goes onto the partner’s return and the partner takes the self-employed health insurance deduction. Salaried “income” partners paid on a W-2 with no ownership stake are employees; anyone with a K-1 is not.
Contract attorneys and of-counsel lawyers paid on a 1099 are outside all of it. They buy their own coverage.
Three ways to pay for staff
Across the 23 states I work in, median pay for paralegals from $39,120 to $73,380, legal secretaries from $39,400 to $63,110 and associate attorneys from $86,970 to $167,970 (BLS, May 2024). That spread decides which option works.
A QSEHRA reimburses employees tax-free for individual coverage they buy, up to $6,450 for self-only and $13,100 for family coverage in 2026. It is for employers with fewer than 50 full-time-equivalent employees that offer no group plan, it has to be offered on the same terms to every eligible employee, and a shareholder owning more than 2% of an S corporation cannot use it.
An ICHRA — HealthCare.gov now calls it a CHOICE Arrangement, though the IRS still uses the old name — has no cap and no size limit. You set amounts by class of employee (full-time, part-time, seasonal, salaried, hourly, location and a few others), and within a class the amount can rise with age, up to 3 to 1, and with family size. Employees must be enrolled in individual coverage to use it. An offer that leaves the lowest-cost Silver plan costing an employee more than 9.96% of household income in 2026 is unaffordable, and that employee can decline it and take a premium tax credit.
A small-group plan puts everyone on one policy and one network, with participation and contribution minimums set by the insurer. It is still the right answer when the team is older or someone needs a specific specialist network, and it is the only route to the Small Business Health Care Tax Credit, which runs through SHOP.
The partner problem
The most common mistake I see in small firms is a partnership setting up an HRA and reimbursing the partners through it alongside staff. It does not work: an ICHRA or QSEHRA is for employees, and HealthCare.gov is explicit that the arrangement needs at least one employee who is not an owner or an owner’s spouse. Partners keep their own policies, paid personally or by the firm as a guaranteed payment, and deduct them on Form 7206.
If the firm is a professional corporation taxed as an S corporation, the rule changes shape but lands in the same place for anyone owning more than 2%: the premium runs through their W-2 and they take the deduction on their own return.
What works for different firms
- Solo practice, one paralegal. You on an individual policy, deducted on Form 7206; the paralegal on a QSEHRA. Nothing to administer beyond the reimbursements.
- Two or three partners, four to eight staff. Partners on their own policies; staff on an ICHRA or QSEHRA. Worth pricing a small-group plan against it if anyone on staff has an ongoing condition and needs a PPO network.
- Associate-heavy firm. An ICHRA with separate classes for salaried attorneys and hourly staff lets you fund each group differently, which a QSEHRA cannot.
What changed in 2026
Three things matter to anyone in a law firm. The enhanced premium tax credits ended, so subsidies stop again at 400% of the poverty line: $62,600 for one person and $128,600 for a family of four. Starting with the 2026 tax year there is no cap on paying back excess advance subsidy, which falls hardest on anyone whose income moves around. And bronze and catastrophic plans now count as HSA-eligible, so an owner on a bronze plan can put $4,400, or $8,750 for a family, into an HSA.
Law Firms by state
- Alabama
- Arkansas
- Colorado
- Florida
- Georgia
- Illinois
- Indiana
- Kansas
- Maryland
- Michigan
- Mississippi
- Nebraska
- Nevada
- North Carolina
- Ohio
- Oklahoma
- South Carolina
- South Dakota
- Tennessee
- Texas
- Utah
- Virginia
- Wisconsin
Sources: HealthCare.gov, CHOICE Arrangements (formerly individual coverage HRAs); IRS Notice 2017-67, Qualified Small Employer HRAs; IRS Publication 15-B (2026), Employer’s Tax Guide to Fringe Benefits; IRS, S corporation compensation and medical insurance issues; IRS, Instructions for Form 7206, Self-Employed Health Insurance Deduction; IRS, One Big Beautiful Bill provisions; IRS Notice 2026-5, Expanded availability of health savings accounts; U.S. Bureau of Labor Statistics, Occupational Employment and Wage Statistics, May 2024.
Questions owners ask
Can a law firm partnership reimburse partners through an ICHRA?
No. Partners who receive a K-1 are self-employed, not employees, so they cannot participate in the firm’s ICHRA or QSEHRA. The firm can pay a partner’s premium as a guaranteed payment, and the partner deducts it with the self-employed health insurance deduction on Form 7206.
Does a solo attorney with one paralegal have to offer a group plan?
No. There is no federal requirement to offer coverage below 50 full-time-equivalent employees. A solo practitioner can buy an individual policy for themselves and reimburse the paralegal through a QSEHRA, up to $6,450 for self-only coverage in 2026.
Are contract attorneys eligible for the firm’s health benefits?
Not through a QSEHRA or ICHRA. Those arrangements cover employees; a contract attorney paid on a 1099 buys their own coverage and takes the self-employed deduction.