Connecticut is opening a new tax-credit program intended to help small employers offer individual-market health coverage, with as much as $5 million available statewide on a first-come, first-served basis.

Under the program announced by the Department of Revenue Services, businesses with 50 or fewer employees may claim up to $1,000 per participating worker each year for the first two consecutive years that they offer an individual coverage health reimbursement arrangement, or ICHRA, through Access Health CT BusinessPlus. The initiative was proposed by Gov. Ned Lamont and approved during the 2026 legislative session.

An ICHRA is not a conventional group health plan. Instead, an employer sets a monthly contribution that eligible workers can apply to individual health-insurance premiums and, depending on the arrangement, other qualified medical expenses. The Centers for Medicare & Medicaid Services describes the structure as an account-based health plan that reimburses employees and can be offered as an alternative to traditional group coverage. Federal rules preserve tax-favored treatment for employer contributions when applicable conditions are met.

Connecticut is tying the credit to plans obtained through Access Health CT BusinessPlus, the small-business arm of the state’s health-insurance marketplace. That gives participating employers a state channel for comparing individual-market coverage while preserving employee choice among available plans. The credit is meant to lower the initial cost of adding a benefit that many very small firms otherwise struggle to provide.

The program’s practical value will depend on participation and plan affordability. Because the appropriation is capped and credits are awarded first come, first served, eligible firms that wait may find the annual allocation exhausted. Employers also will need to structure contributions carefully: the Internal Revenue Service notes that ICHRAs are governed by federal affordability and nondiscrimination rules, and that affordability calculations are connected to the lowest-cost silver plan available in an employee’s location.

For workers, the arrangement shifts plan selection from the employer to the individual market. That can widen choice, but it also makes the employer contribution and the price of locally available plans central to how much coverage costs the employee. Workers offered an ICHRA should review how the offer affects eligibility for federal premium tax credits before enrolling.

The credit also creates an implementation test for the state marketplace. Participation will show whether a targeted tax incentive can bring very small employers into coverage arrangements that leave plan choice with workers. Because each business sets its own contribution, the benefit to employees will vary even when employers receive the same per-worker credit.

The state has not guaranteed that every qualifying application will be funded. Its announcement frames the $5 million as a limited pool, so uptake will determine how broadly the credit reaches Connecticut’s small-business workforce. Employers considering the benefit should confirm eligibility and application timing with Revenue Services and BusinessPlus before committing to a plan year.