* Updated with 2021 QSEHRA contribution rates*
So you’ve decided to stop paying more than necessary for a group plan - smart move! Health reimbursement arrangements (HRAs) have been around for years now, but they keep getting better and better. So now the choice comes down to a Qualified Small Employer Health Reimbursement Arrangement (QSEHRA) or Individual Coverage Health Reimbursement Arrangement (ICHRA). There are benefits to both, so how do you decide between two good things?
Let’s compare the two by asking and then answering a good variety of questions you may have!
How big is your company?
- QSEHRA is capped at 50 employees
- ICHRA can be used in the smallest business (your nanny!) to the largest and those in between
How much do you want to offer?
- QSEHRAs have a maximum annual allowance of $5,300 for employees with individual insurance plans and $10,700 for employees with married and family insurance plans.
- No maximum limits with ICHRAs means employers can fully reimburse healthcare costs if they choose
You can vary the amounts you offer based on certain criteria (age, family size). ICHRA allows for greater variety across classes while QSEHRA does not.
What type of insurance do your employees have?
Employees need to secure their own insurance to participate in each HRA, but the requirements are slightly different. For QSEHRA, the health insurance must meet Minimum Essential Coverage which can be insurance purchased from the marketplace, a spouse's plan, a parent's plan, medicare, tricare, or cobra. ICHRA is more limiting, the insurance must be purchased from the individual market (the metal level insurances) or Medicare Part A +B or Part C , spouse's plans don't integrate with ICHRA.
Do you want to include all of your employees or just a few?
- QSEHRA is available to all full time employees. Part time employees can participate but you must offer the HRA on the same terms
- ICHRA classes allow for greater flexibility, however the terms must be the same within each class
Do you have a group plan in place? Do you want to keep it?
- If yes, QSEHRA is not for you. Employees cannot participate in both a group plan and the HRA. However, this restriction does not apply to life insurance and disability.
Pro-Tip: If your business currently has a group health plan and wants to change to a QSEHRA, you can cancel the group plan at anytime. You don’t have to wait until the end of the year or an enrollment period. This differs from the ICHRA, which cannot be changed during the plan year.
- You can offer some employees ICHRA and some a group plan, however not within the same class
Do your employees have premium tax credits?
- Can have QSEHRA and PTC but the amount is reduced. Important note: Employees with tax-credits can’t opt-out of the QSEHRA and still receive credits. Their eligibility for tax credits is based on the reimbursement amount offered to them, not actually received.
- Cannot have ICHRA and PTC. You can opt-out of an ICHRA IF PTCs are more favorable, IF the ICHRA is deemed unaffordable, and IF you are eligible for the PTC to begin with.
Leave the heavy lifting to Take Command
Once you’ve determined the HRA that works best for your business and employees, let Take Command get you set up! Our online QSEHRA and ICHRA Administration tools are user-friendly and we’re here to help you every step of the way.
A wife to one and mother to four, Keely does all of the things. She’s also dabbled in personal finance blogging and social media management, contributed to MetroFamily magazine, and is passionate about good food, treasure hunting and upcycling. With a B.S. in Psychology from the University of Oklahoma and a knack for a witty punchline, it’s no surprise that Keely’s social posts are as clever as they get. In her (very little) free time, you’ll find Keely with her nose in a book or trying out a local restaurant with her family.