Yes, I looked into it, you are right. In Mass. I can either set up a "Section 125 health savings account", or just set up a plan to offer insurance through the Exchange. Either way would be less expensive than just paying him more. So I took a shot at setting up a plan. It took about 10 minutes to set it up, and there are about 40 plans to choose from. The least expensive was about $220/month. So if I pay 1/2, it would be $110 from me. And then I get a portion of that cost back as a tax credit. I think this is the way to go. This will be my employee's "raise" this year. It amounts to around 75 cents per hour, I think.