If you’re exploring your options for providing health benefits to your employees, you may have come across QSEHRA and ICHRA. Both are types of Health Reimbursement Arrangements (HRAs), but they have distinct differences that make them better suited for different organizations. In today’s blog post, we’ll dive into what QSEHRA and ICHRA are and how they differ. If you’re new to ICHRA, check out our ICHRA Guide!
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What is QSEHRA?
QSEHRA, or the Qualified Small Employer Health Reimbursement Arrangement, is a type of HRA designed specifically for small employers with fewer than 50 full-time equivalent employees who do not offer a group health plan. With a QSEHRA, employers can reimburse employees for individual health insurance premiums and eligible medical expenses on a tax-free basis, up to a specified maximum limit.
What is ICHRA?
ICHRA, or the Individual Coverage Health Reimbursement Arrangement, is another type of HRA available to employers of any size. Like QSEHRA, ICHRA allows employers to reimburse employees for individual health insurance premiums and eligible medical expenses tax-free. However, ICHRA offers more flexibility in terms of employee eligibility, contribution limits, and plan design.
Key Differences Between QSEHRA and ICHRA
Eligible Employers: QSEHRA is available only to small employers with fewer than 50 full-time equivalent employees who do not offer a group health plan. In contrast, ICHRA is available to employers of any size, with no restrictions on offering a group health plan.
Contribution Limits: QSEHRA has annual contribution limits set by the IRS, while ICHRA does not have any maximum contribution limits.
Employee Classes: ICHRA allows employers to define different classes of employees and offer different HRA terms to each class, whereas QSEHRA requires employers to offer the same reimbursement amount to all eligible employees.
Integration with Premium Tax Credits: With QSEHRA, employees may still be eligible for premium tax credits when purchasing individual health insurance on the Marketplace, but the tax credit will be reduced by the amount of the QSEHRA reimbursement. On the other hand, with ICHRA, employees may choose between the ICHRA reimbursement or the premium tax credit, but they cannot receive both.
Both QSEHRA and ICHRA are viable options for employers looking to provide healthcare benefits to their employees. While QSEHRA is better suited for small employers with fewer than 50 full-time equivalent employees, ICHRA offers greater flexibility and is available to employers of all sizes. By understanding the key differences between these two HRAs, you can make an informed decision on which option best suits your organization’s needs.
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Important Notice: Remodel Health does not intend to provide specific insurance, legal, or tax advice. Remodel Health always recommends consulting with your own professional representation to properly evaluate the information presented and its appropriate application to your particular situation.