ICHRA vs. QSEHRA: What’s the difference between Individual Coverage Health Reimbursement Arrangement and Qualified Small Employer Health Reimbursement Arrangement? We're glad you asked. Both are tax-advantaged tools to consider when searching for a small business health insurance solution for your company.
ICHRA vs. QSEHRA: what's the difference?
Now that we’ve spent a couple of years learning the ins and outs of QSEHRA as both an individual broker and a market leader for QSEHRA administration, it’s time to learn another weird acronym and the fun new guidelines and regulations that accompany it.
As a refresher, ICHRA is one of the new HRA options passed by the departments of Treasury, Labor, and Health & Human Services. The options are in response to an executive order from President Trump to increase availability and flexibility of HRAs and both allow employers to reimburse employees for health insurance.
For those familiar with Qualified Small Employer Health Reimbursement Arrangements (QSEHRA), they are an awesome, tax-advantaged strategy for small businesses to afford personalized health benefits for their team. QSEHRA health insurance is often praised for being an on-ramp to benefits for small companies.
Now that there's a relatively new type of HRA on the table as of 2020- the ICHRA plan - we thought it would be helpful to go over the differences in the two. We believe that when you evaluate ICHRA pros and cons, ICHRA addresses some of the limitations that QSEHRA faced in terms of how employee classes were divided, eligibility, and the role premium tax credits play.
Here's what you need to know!
QSEHRA vs. ICHRA
Below are some of the general differences we’ve found so far between the two HRAs.
| QSEHRA | Individual Coverage HRA | |
| Business size | Fewer than 50 full-time employees may participate | Any business of any size may participate |
| Can it be offered with a group plan? | No | Yes, however the business cannot offer both the group policy and the HRA to the same employee class. |
| Is there a maximum contribution amount? | In 2023, QSEHRA maximum annual allowance amounts are set at $5,850 for single employees and $11,800 for employees with a family. | ICHRAs don’t cap out their annual allowance amounts. |
| Can amounts vary per employee? | Employer can vary allowance amounts by family status, age, and family size, they cannot vary based on employee classes. | A business can adjust allowance amounts according to different employee classes, as well as age and family size. |
| Who is eligible? | All full-time employees are eligible. The employer may include part-time employees, but the HRA must be offered on the same terms. | The business determines the eligibility guidelines according to each employee class set ahead of time, but the HRA must be offered on the same terms to all employees in each class. |
| How does it work with premium tax credits? | Employees participating in the QSEHRA plan can still receive premium tax credits, but the amount you receive is reduced from the HRA allowance. | Employees participating in the ICHRA plan aren’t eligible for premium tax credits. |
| Do you have to have health insurance to participate? | Employees must have an individual health plan that meets MEC requirements to participate. | Employees must have individual health insurance to participate in the HRA. |
Affordability and ICHRA and QSEHRA
We've put together this quick reference chart to educate you on how affordability and tax credits work differently with ICHRA and QSEHRA.
What comes next
We are excited to see more flexibility infused into the HRA world that will help small business like us (and our clients!) afford health benefits for employees. We believe HRAs like QSEHRA and ICHRA are here to stay, thanks to their tri-department and bi-partisan support.
ICHRAs have grown 3.5x in the past year and QSEHRAs have doubled in size on the market during that same time period, according to the HRA Council.
Is your company or client going to be a part of this exciting change? Chat with our team with any questions you may have about these new, tax-friendly benefits or check out our HRA comparison chart or our new ICHRA Guide for more information on its background, setup process, requirements, and rules.
As QSEHRA administrators and ICHRA administrators, our team is ready to help you decide which benefits solution is best for your employees and your business.
Additional resources →
- Learn about ICHRA Classes
- Learn about ICHRA Rules
- Learn about ICHRA Requirements
- Learn about ICHRA Regulations
- Learn about ICHRA Plan FAQs
- Learn about our ICHRA administration platform
- More context for differences between QSEHRA vs ICHRA
This post was originally published in 2019 and has been updated with new information and insights for 2023.
